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.1OW  TO  MAKE 

MONEY 


In  Foreign  Exchange 
and  Foreign  Bonds 

By 

W.  J.  GREENWOOD 


Price  $2.00  Net 


BY  THE  SAME  AUTHOR 
In  Preparation,  Ready  December,  1920 


Second  and  Enlarged  Edition  of 

"American    and    Foreign    Stock    Exchange 
Practice,  Foreign  Stock  and  Bond  Trading, 

and  the 
Business  Corporation  Laws  of  All  Nations" 


CONTENTS 

STOCK  EXCHANGE  PRACTICE  EXPLAINED,  for  the  chief  AMERICAN  AND 
CANADIAN  EXCHANGES,  FOREIGN  BOURSES  of 

Alexandria,  Amsterdam,  Antwerp,  Barcelona,  Bilbao,  Bale,  Berlin,  Brussels, 
Cairo,  Constantinople,  Dusseldorf,  Essen,  Frankfort,  Geneva,  Genoa,  Hamburg, 
Lille,  Lisbon,  London,  Lyons,  Madrid,  Marseilles,  Milan,  New  York,  Paris, 
Rome,  St.  Petersburg,  Sydney,  Turin,  Vienna,  Zurich,  etc. 

Contains  Foreign  Stock  Exchange  and  Corporation  Law  Terms  in  French, 
German,  Spanish,  Italian,  Japanese,  etc.  Explains  kinds  of  Stocks  and  Bonds. 

FOREIGN  CORPORATION  AND   REGISTRATION  LAWS,   AND  TAXES, 

affecting  American  Firms  carrying  on  business  Abroad  in 

Abyssinia,  Argentine  Republic,  Austria,  Belgium,  Brazil,  Bulgaria,  Chili, 
Colombia,  Congo  Free  State,  Cuba,  Denmark,  Egypt,  Finland,  France,  German 
States,  Great  Britain,  British  Colonies  and  Dependencies,  Greece,  Guatemala, 
Holland,  Hungary,  India,  Italy,  Japan,  Luxembourg,  Mexico,  Monaco,  Monte- 
negro, Norway,  Peru,  Poland,  Portugal,  Rumania,  Russia,  St.  Marin,  Serbia, 
Spain,  Sweden,  Switzerland,  Turkey,  Union  of  South  Africa,  Uruguay,  Venezuela. 

THE  LAWS  OF  THE  CHIEF  STATES  OF  THE  U.  S.  A. 

respecting 

Business  Corporations  (incorporation  and  management) ; 
Registration  of  Foreign  Traders  and  Corporations  (  U.  S.  and  Alien); 
State  Taxes  and  Franchise  and  Other  Fees  Payable;  Blue  Sky  Laws. 

Five  complete   Indexes:    English,   French,   German,   Geographical  and   General. 
About  500  pages,  bound  in  cloth.     Price  about  $ 6  net. 


Published  by 

FINANCIAL  BOOKS  COMPANY 
49  Wall  Street  New  York 


Extracts  from  Foreign  Reviews  and  Opinions 

of  "American  and  Foreign  Stock  Exchange 

Practice,"  etc. 


Sir  Edward  Holden,  Baronet,  M.  P.  (late  Chairman  of  the  London 
City  and  Midland  Bank): — "Will  be  exceedingly  useful  to  us." 

Journal  of  the  Institute  of  Bankers  (London). — "All  those  who  have 
financial  relations  with  other  countries  will  give  this  book  a  hearty 
welcome,  for,  so  far  as  we  know,  it  is  the  only  book  in  the  English 
language  dealing  with  the  subject.  It  is  not  a  legal  treatise,  but  a 
handbook  for  the  business  man,  and  within  its  pages  the  author 
has  contrived  to  condense  an  enormous  mass  of  information.  A  com- 
parative glance  through  the  Company  Laws  of  the  chief  commercial 

nations  gives  the  reader  much  food  for  reflection. 

Details  of  almost  every  kind  connected  with  the  subject  will  be  found 
in  the  book,  including  Bourse  regulations,  stamp  laws,  explanations 
of  foreign  terms,  and  a  variety  of  other  information." 

Truth  (London). — "Will  be  useful  to  brokers,  bankers,  and 
business  men  generally,  who  have  not  hitherto  had  available  any 
English  work  dealing  with  these  subjects.  In  addition  to  an  account 
of  the  regulations  and  practice  of  the  leading  Bourses,  Mr.  Greenwood 
describes  the  most  important  features  of  foreign  company  and  part- 
nership laws,  and  supplies  information  for  the  legal  guidance  of 
companies  or  firms  opening  works,  branches  or  agencies  abroad." 

Mining  World  (London). — "This  work  occurs  to  us  as  being  somewhat 
unique.  The  author  is  an  Accountant,  and,  having  had  large 
experience  in  foreign  audits,  is  entitled  to  speak  with  author- 
ity. Copious  notes  as  to  the  practice  ruling  on  the  Stock  Exchanges 
of  the  Continent,  America,  &c.,  are  given.  Altogether,  Mr.  Green- 
wood has  managed  to  compile  a  very  informing  volume,  which  should 
prove  most  useful  to  the  investing  public." 

The  Secretary — London — (Official  Journal  of  the  Chartered  Institute 
of  Secretaries.) — "The  legal  formalities  and  the  cost  incident  to  placing 
securities  on  Foreign  Bourses  are  the  subject  of  frequent  queries  in 
the  library  of  the  Institute,  and  information  is  often  sought  by  Secre- 
taries of  Public  Companies  which  contemplate  the  opening  of  branches, 
works  or  agencies  in  foreign  countries  or  the  Colonies.  Mr.  Green- 
wood has  clearly  been  at  great  pains  in  compiling  from  official  sources 
the  materials  required  in  dealing  with  enquiries  of  this  kind.  A 
special  feature  of  the  book  is  a  detailed  account  of  the  practice  of  the 
more  important  foreign  Company  Laws,  in  particular  of  the  French, 
Belgian  and  German  systems." 

Financial  Review  of  Reviews  (London). — "The  book  is  well  arranged. 
It  should  prove  both  popular  and  useful/' 


Foreign  Reviews  and  Opinions 
(Continued) 


THE  FORMER  BRITISH  SOLICITOR  GENERAL,  Sir  John  Simon,  King's 
Counsel,  Member  of  Parliament,  "I  certainly  think  it  will  be  most  useful." 

FINANCIAL  TIMES  (London). — "A  large  amount  of  painstaking  work  has  been 
entailed  in  the  production  of  this  book,  which  explains  the  practice  of  all  the  most 
important  foreign  Bourses,  and  even  includes  the  House  expressions  of  the  various 
countries. 

It  is  the  first  book  issued  dealing  exhaustively  with  this  subject,  and  it  will  be 
welcomed  by  members  of  the  London  Stock  Exchange,  especially  as  meeting  a 
'want'. 

A  knowledge  of  the  practice  of  the  foreign  Bourses  is  becoming  more 
imperative  every  year,  as  the  solidarity  of  the  world  of  finance  develops.  Mr. 
Greenwood  is  to  be  congratulated  on  his  authorship  of  this  book,  which  seems 
likely  enough  to  become  the  recognised  work  of  reference  on  the  subject." 


DAILY  NEWS  (London).— "A  useful  book.  A  full  index  of  foreign  terms  and  their 
English  meanings  adds  greatly  to  its  value  as  a  work  of  reference,  while  the  gen- 
eral practice  of  the  principal  foreign  Bourses  is  explained  clearly  and  concisely; 
this  book  should  fill  a  much-felt  want." 


JOINT  STOCK  COMPANIES'  JOURNAL. — "London,  we  are  given  to  boast,  is 
the  great  market-place  of  the  world,  the  clearing  house  for  stock  and  share  deal- 
ings of  the  world,  the  monetary  centre  of  the  universe,  and  other  things:  and  yet, 
with  a  self-sufficiency  which  is  wonderful  and  an  obtuseness  which  is  painful  to 
contemplate,  men  of  business  in  the  metropolis  are  curiously  ignorant  of  foreign 
methods  of  operation. 

"Mr.  W.  J.  Greenwood,  an  experienced  accountant  and  auditor,  supplies  a 
real  deficiency,  then,  in  his  treatise  on  Foreign  Stock  Exchange  Practice  and 
Company  Laws.  It  is  a  dictionary  as  well  as  a  handbook,  showing  the  market 
terms  of  foreign  countries  and  English  equivalents;  but  this  feature,  useful  as  it 
is,  is  not  the  most  practically  valuable  of  the  volume,  which  treats  shortly,  plainly 
and  authoritatively  of  the  methods  and  laws,  written  and  unwritten,  of  the 
French,  Belgian,  Swiss,  German,  American,  Dutch,  Spanish,  Italian,  Austrian, 
Russian,  Turkish,  Egyptian,  and  Portuguese  Bourses.  An  important  section 
is  devoted  to  a  sketch  of  laws,  which  have  to  be  observed  by  firms  and  companies 
opening  works,  branches  or  agencies  abroad  or  in  British  colonies  and  depen- 
dencies, and  there  are  indexes  so  exhaustive  as  to  make  reference  easy." 


STOCK  EXCHANGE  GAZETTE  (London).— "To  all    having  dealings  with 
European  and  other  centres,  the  book  should  be  extremely  useful." 


PALL  MALL  GAZETTE  (London).— "Will  be  valuable  to  firms  in  the  banking  and 
stockbroking  world.  Mr.  Greenwood  has  broken  much  new  ground,  and  his  book 
is  likely  to  be  of  great  service." 


The  Test  of  Usefulness 


The  firms  named  below  are  some  of  the  leading  Banking,  Stockbroking  and  Trading 
firms  of  the  world,  who  are  users  of  the  Book  "American  and  Foreign  Stock  Exchange 
Practice." 


INTERNATIONAL  PRIVATE  BANKERS 


Fredk.  Benson  A  Co. 
Brown,  Shipley  A  Co. 
Cox  A  Co. 

Emlle  Erlanger  A'Co. 
Otto  H.  Fuerth.    * 
Fredk.  Huth  A  Co. 


Kuhn  Loeb  A  Co. 

Lazard  Bros. 

J.  P.  Morgan  A  Co. 

Murrietta  A  Co. 

8.  Pearson  A  Co.,  Ltd. 

Speyer  Bros.,  Ac.,  Ac. 


INTERNATIONAL  BANKING  CORPORATIONS 


Anglo-Austrian 

Anglo-Egyptian 

Anglo-Japanese 

Anglo-South  American 

Banco  de  Chile 

Banco  Espafiol 

Bank  of  Adelaide 

Bank  of  Africa 

Bank  of  England 

Bank  of  Montreal 

Bank  of  New  Zealand 

Bank  of  Roumania 

Banque  de  France 

Barclay  A  Co. 

British  Bank  of  South  America 

Capital  A  Counties 

Canadian  Bank  of  Commerce 

Commercial  Bank  of  Scotland 

Colonial  Bank 

Comptolr  d'Escompte 

Credit  Lyonna  a 

D  utsche  Bank 


Farmers'  Loan  A  Trust  Company 

Guaranty  Trust  Company  of  New  York 

Imperial  Ottoman  Bank 

Lloyds'  Bank 

London  A  Brazilian 

London  A  Hanseatic 

London  A  South  Western 

London  Bank  of  Mexico  A  S.  America 

London.  City  A  Midland 

London,  County  A  Westminster 

Mercantile  Bank  of  India 

National  Bank  of  India  *-\i 

National  Bank  of  Turkey 

National  City  Bank,  New  York 

National  Provincial  Bank  of  England 

Parr's  Bank 

Russo-Chinese  Bank 

Society  Generate  de  Paris 

Swiss  Bankverein 

Trust  Company  of  America 

Yokohama  Specie  Bank 


AMERICAN  INVESTMENT  BANKERS  AND  STOCK  BROKERS 


Bonbrlght  A  Co.,  Inc. 
Goldman,  Sachs  A  Co. 
Hayden,  Stone  A  Co. 
Heidelbach,  Ickelheimer  A  Co. 
Hornblower  A  Weeks 
Keen  A  Ward 
Logan  A  Bryan 
A.  Lcwtsohn  A  Sons 
Lee  A  Kretschmar 


Newburger,  Henderson  A  Loeb 

Plympton,  Gardiner  A  Co. 

Post  A  Flagg 

Pouch  A  Co. 

Leo  M.  Prince  A  Co. 

Wm.  A.  Read  A  Co. 

Wm.  Salomon  A  Co. 

Ware  A  Leland,  Ac.,  Ac. 


LONDON  STOCK  BROKERS 


Cazenove  A  Akroyd 
Dunbar  A  Co. 
Eiser  A  Co. 
Ellis  A  Co. 
Faithfull  Begg  A  Co. 
Panmure  Gordon  A  Co. 
Greener,  Dreyfus  A  Co. 
Haschke  A  Austin 
Helbert,  Wagg  A  Russell 
Kennedy  A  Robertson 


Kltcat  A  Altken 

Lawrence,  Sons  A  Gardner 

Magnlac.  Williamson  A  Co. 

Mocatta  A  Foa 

Rowe  A  Pitman 

Sternberg  Bros. 

Wlldy  A  Co. 

Winch  A  Co. 

Zorn  A  Leigh-Hunt,  Ac.  ,Ac. 


INTERNATIONAL  TRADING  COMPANIES,  ETC. 


Kodak,  Ltd. 

Maple  A  Co.,  Ltd. 

Marconi's  Wireless  Telegraph  Co. 

Transvaal  Chamber  of  Mines 

The  Linen  Thread  Co.,  Ltd. 

National  Assn.  of  Manufrs.  of  the  U.S.A. 


Nobel  Dynamite  Trust  Co.,  Ltd. 
Oceana  Consolidated,  Ltd. 
Rolls,  Royce,  Ltd. 
Spies  Petroleum  Co. 
Twyford's  Ltd. 
Ac.,  Ac. 


How  to  Make  Money 

in  Foreign  Exchange  and 
Foreign  Bonds 

By  W.  J.  GREENWOOD,  C.P.A. 

Specialist  In  Foreign  Audits  and  Investigations,  Certified  Public 
Accountant  (U.  S.  A.) ;  Certified  Accountant  (London) ;  Expert- 
Comptable  Patent^  (Paris);  Contador  Publico;  Bttcherrevisor. 


AUTHOR  OF 

"American  and  Foreign  Stock  Exchange  Practice, 
Foreign  Stock  and  Bond  Trading,  and  the 
Business  Corporation  Laws  of  All  Nations." 


Formerly  Special  Lecturer  on  Foreign  Exchange  and 
International  Trade  Methods — University  of  Lon- 
don Commercial  Courses 


COPYRIGHT 

All  rights  of  reproduction  and 
translation  reserved. 


FINANCIAL  BOOKS  COMPANY 

49  Wall  Street,  New  York 

1920 


NOTICE 

The  author  and  the  publishers  of  this  book 
have  no  connection,  direct  or  indirect,  with 
any  person,  firm,  or  corporation  dealing  in 
foreign  exchange  or  foreign  stocks  and  bonds. 


Copyright,  1920, 

By  W.  J.  GREENWOOD, 

in  U.  S.  A.  and  in  Gt.  Britain  and  Canada 


Printed  In  U.  S.  A. 


PREFACE 

For  some  time  the  foreigners  resident  in  the  United  States 
have  been  buying  largely  of  bank  drafts  on  French,  Italian,  Bel- 
gian and  other  cities,  getting  from  200%  to  500%  in  foreign 
money  for  their  American  dollars.  This  foreign  money  has  been 
used  to  buy  good  foreign  bonds,  which  are  now  obtainable  much 
below  usual  prices  but  which  will  ultimately  be  saleable  at  several 
times  their  present  cost. 

American  investors  appear  to  have  kept  out  of  this  very 
profitable  business,  probably  because  they  did  not  know  of  the 
large  profits  to  be  made,  or  because  they  did  not  understand  the 
practical  part  of  foreign  exchange. 

With  a  view  to  proving  the  real  profits  obtainable  from  these 
dealings,  the  author  has  made  an  investigation  of  the  various 
methods  of  buying  and  selling  foreign  exchange,  and  foreign 
bonds  and  stocks,  which  are  open  to  the  American  public. 

The  results  of  the  investigation  are  stated  clearly  and  im- 
partially in  this  report. 

The  examination  proves  that  a  very  favorable  opportunity  is 
open  now  for  making  large  profits,  while  buying  only  the  soundest 
class  of  securities. 

The  investor  is  shown  in  this  report  how  he  can  manage  the 
investments  himself,  he  is  directed  to  the  best  methods  of  invest- 
ing either  small  or  large  sums  and  is  advised  how  to  buy  and  how 
and  when  to  sell. 

Details  are  given  of  the  best  bonds  of  each  of  the  chief  foreign 
countries,  with  their  present  market  prices  and  indications  of  the 
probable  profits  to  be  made.  The  security  behind  each  bond  is 
also  stated. 

The  author's  knowledge  and  experience  of  foreign  bond  and 
stock  dealings  may  be  gauged  by  the  details  given  on  the  title 
page,  and  by  the  opinions  of  Bankers,  Stockbrokers  and  Financial 
journals  respecting  hi,s  book  on  Foreign  Stock  Exchange  Practice. 

W.  J.  GREENWOOD 

49  Wall  Street 
New  York 

448416 


CONTENTS 


General  Survey  of  Foreign  Exchange  Posi-   Page 
tion 1 

Safety  of  investment,  foreign  experience,  credit  ef 
nations,  foreign  exchange,  effect  of  gold  stocks  on 
credit,  present  financial  position  of  warring  nations 
— Allies  not  insolvent — payment  of  war  debts,  pay- 
ments already  made  on  account,  reasons  of  present 
indebtedness;  example  of  effect  of  low  exchange 
rate,  who  is  the  loser;  method  of  improving  Euro- 
pean exchange  rates,  profits  on  European  invest- 
ments, slow  but  sure;  example  of  Netherlands  in- 
vestors; double  profits  realised  by  movements  of 
exchange,  reason  for  high  profits,  profits  on  French 
Government  5%  bonds;  special  advantages  to 
American  investors;  when  will  French  exchange 
improve,  additional  profits  by  rise  in  market  values 
of  bonds,  taking  quick  profits,  profits  on  British 
Government  Bonds,  pointers. 


An  Explanation  of  Foreign  Exchange 13 

Domestic  money,  international  money,  the  fixed 
buying  price  for  gold,  bank  purchases  of  gold,  how 
gold  coins  are  sold  at  cost,  alloys,  variations  in 
price  of  gold,  comparison  of  United  States,  French, 
and  British  gold  coinage  values,  normal  rates  of  for- 
eign exchange  for  gold  coins  of  chief  nations, 
methods  of  settlement  of  international  debts,  war 
changes — suspension  of  payments  in  gold — Amer- 
ican credit  prices  increased ;  European  indebtedness 
to  United  States,  European  debts  offered  cheaply, 
how  profits  may  be  made  in  buying  them,  risks  in- 
volved, reasons  why  no  risk  of  loss  exists;  time  re- 
quired for  realising  full  profits,  realising  with  part 
of  profits;  example  from  American  history,  French 
parallel  case,  Baron  Rothschild's  advice. 

i 


CONTENTS 

Page 

Table  of  Values  of  Foreign  Monies,  at  their 
Normal  or  Gold  Values,  as  Used  for  Pay- 
ments Between  Nations  21 


The  Present  High  Price  of  Gold :  Its  Effects 
on  Foreign  Exchange  Rates 22 

Government  buying  price  for  gold,  why  govern- 
ments are  not  now  issuing  gold,  issues  of  gold  coins 
of  reduced  values;  hoarding  of  gold  and  increased 
use  by  jewellers,  reasons  for  rise  in  price,  reason  for 
suspension  of  gold  payments  abroad ;  illustration  of 
effects  on  foreign  trade  of  the  United  States,  price  of 
goods  at  normal  exchange  rates,  price  at  present 
rate  of  exchange,  comparison  of  pre-war  and  present 
American  export  prices,  why  America  is  losing  ex- 
port orders. 


How  Money  is  Actually  Made  in  Foreign 
Exchange 27 

Profits  made  by  bankers  on  foreign  exchange  deal- 
ings, example  of  profit  made  by  American  banker; 
profits  to  be  made  by  investors,  example  of  profit 
made  by  purchasing  foreign  bonds,  examples  of  in- 
vestments for  1,  2  and  3  years. 


The  Present  Financial  and  Industrial  Posi- 
tions of  the  Chief  European  Nations 


France — Wealth  and  Resources 32 

General  distribution  of  wealth,  usual  investments; 
Paris  as  an  industrial  centre,  methods  of  working, 
increase  in  manufacturing  power;  American  goods 

ii 


CONTENTS 

Page 

in  demand,  French  credit;  special  artistic  capacity, 
its  yield  of  wealth ;  iron  and  coal  supplies,  repairing 
of  war  damages,  new  machinery  and  plants  in- 
stalled, wireless  plant,  hydro-electric  power; 
wealth  from  colonies,  French  assets  and  liabilities, 
extension  of  French  commerce,  important  new 
enterprises. 

Bonds  of  French  Cities — The  Security  for 

Their  Repayment 36 

Restriction  of  borrowing  by  French  cities;  Munic- 
ipal income.  Resources,  income  and  indebtedness 
of  Paris,  Lyons,  Marseilles,  Bordeaux.  Pointers 
on  the  present  financial  position  of  France. 


Description  of  French  Government  Bonds; 

French  Terms  Used . .  42 


Belgium — Wealth  and  Resources 45 

Agriculture,  coal,  iron  and  steel;  plant  and  mach- 
inery, raw  material,  textiles,  glass;  railroads,  ports, 
colonies;  American  trade  openings;  Belgian  trade, 
safety  of  investments;  why  Belgian  exchange  is  low, 
signs  of  recovery,  incentive  to  restoration  of  normal 
exchange;  population  and  area;  pointers  on  Belgian 
trade. 


Great  Britain— Is  She  Solvent? 52 

Britain's  burden;  repayments  of  war  debt  already 
made,  sources  of  revenue;  forced  reductions  of  im- 
ports from  United  States,  repayment  of  indebted- 
ness to  U.  S.,  British  bank  deposits;  industries  at 
work  again,  when  will  the  war  expenditure  be  paid 

iii 


CONTENTS 

Page 

off;  man  power  of  U.  K.,  increase  of  territory;  why 
British  exchange  will  probably  be  the  first  to  recover, 
pointers  on  British  financial  and  trading  position; 
how  the  European  nations  are  working  out  their 
own  salvation  by  trade. 


Advice  on  Investment  in  British  Securities .       60 

Delay  in  payments  for  exports,  probable  move- 
ments in  exchange  rates;  why  British  securities  are 
cheap;  no  British  income  tax  payable  by  American 
investors;  Government  bonds,  bonds  and  stocks  of 
British  corporations;  public  buying  of  securities, 
present  income  yield;  warning  to  investors. 


Canada — Her  Growing  Wealth 63 

Development  of  manufacturing;  exports;  increase  in 
imports,  cause  of  fall  in  exchange,  fall  only  tempor- 
ary; Canadian  securities  now  cheap,  example  of 
profits  to  be  made;  Canadian  Government  and 
Municipal  Bonds;  pointers  on  Canadian  trade, 
comparison  of  the  trade  between  Canada  and  the 
United  States  and  with  the  British  Isles;  figures 
showing  the  growth  of  Canadian  manufacturing, 
the  capital  invested,  and  the  value  of  the  products; 
figures  of  the  amounts  offered  and  subscribed  for 
each  of  the  Canadian  War  Loans. 


Germany — Will    She    Recover.     Which    Ger- 
man Bonds  are  Safe 68 

Why  Germany  has  been  standing  still;  German's 
military  failure  a  real  benefit  to  her;  prospects  of 
improvement,  purchases  of  bank  exchange;  danger 

iv 


CONTENTS 

Page 

of  repudiation  of  German  war  loans;  municipal 
bonds — their  safety;  German  income  tax;  pointers 
on  German  investments. 


Austria — Resources  of  the  New  Republic 72 

Former  Austrian  dependence  on  Germany;  a  re- 
lease of  the  smaller  nations,  shrinkage  of  Austrian 
area  and  wealth;  prospects  of  recovery,  extensive 
resources,  further  resources  available;  the  lessons  of 
the  war,  examples  to  follow;  opportunities  for 
Americans,  advice  on  investments. 


Italy — Her  Commercial  Re-organisation 76 

Financing  of  German  overseas  trade  by  competitors, 
German  control  of  Italian  banks,  German  grip  on 
Italian  commerce,  effect  on  Italian  war  policy;  new 
banking  corporations  for  Italy;  Italian  war  losses; 
Italian  agriculture,  manufacturing  growth;  pros- 
pects for  United  States  trade;  electrical  and  en- 
gineering trades,  trained  workmen;  Italian  emi- 
gration to  America,  thrift  of  wage  earners;  Italy's 
chief  asset  is  her  agriculture ;  trade  agreement  with 
Austria;  Italian  taxation;  example  of  investments  in 
Italian  securities,  tax  on  bonds. 


Russia— Present  and  Future. '. 82 

Warning  as  to  bank  exchange  purchases;  difficulties 
of  government,  several  separate  republics  probable; 
Russia  a  valuable  market  for  United  States  manu- 
factures; French  influence  on  Russian  affairs;  dis- 
honesty of  Russian  rulers,  pointers  respecting 
present  Russian  internal  conditions. 

The  Ukrainian  Republic  and  Its  Resources       86 


CONTENTS 
How  to  Invest 


Page 
What  to  Buy — In  Small  Amounts 87 

Quantities  purchaseable;  buying  foreign  currency 
notes,  market  prices;  calculation  of  prices  of  notes 
of  French,  Belgian,  Italian,  Swiss,  German,  British 
and  other  governments;  gold  money;  buying  small 
units,  savings  invested  at  high  interest,  profits  to  be 
made — how  soon?  List  of  prices  of  foreign  bank 
and  currency  notes,  advice  as  to  buying  foreign 
currencies. 

What  to  Buy — In  Moderate  and  Large  Sums . .  91 
Bank  notes,  bank  exchange,  why  bonds  are  better; 
foreign  government  bonds,  municipal  bonds,  indus- 
trial bonds;  which  exchange  rates  will  rise  quickly; . 
New  York  Exchange  quotations,  difference  be- 
tween internal  and  external  loans;  how  to  buy, 
methods  of  buying,  buying  on  margins,  loans  on 
purchases;  delays  in  delivery;  bearer  and  registered 
bonds.  Selecting  the  investment;  profits  realisable 
at  any  time,  avoiding  taxation;  borrowing  on  bonds 
purchased,  example  of  increased  profits  by  borrow- 
ing on  bonds;  collecting  foreign  debts,  selling 
against  payment  in  foreign  bonds. 


The  Best  Foreign  Bonds  to  Buy 


Argentina 99 

Government  and  Railway  Bonds. 

Austria  and  The  Balkans 101 

Municipal  Bonds. 


CONTENTS 

Page 
Belgium 102 

Government  Loans. 

Britain 103 

War  Loans,  Municipal  and  County  Bonds,  Colonial 
Bonds,  Foreign  Government  Bonds  traded  in  Lon- 
don, Industrial  stocks,  Examples  of  profits  obtain- 
able on  British  securities. 

Canada 108 

War  Loans,  Provinces  and  City  Bonds. 

France 110 

War  Loans,  Municipal  and  Railroad  Bonds. 

Germany , 115 

Bonds  of  German  Cities,  Land  Bank  Mortgage 
Bonds,  Industrial  Bonds. 

Italy 119 

Government  Bonds,  Treasury  Notes. 

Japan 120 

Sterling  Loan  Bonds. 

Russia 122 

Government  Bonds,  quotations  on  the  London  and 
Paris  Stock  Exchanges. 

Mexico 125 

Present  position  of  Mexico,  External  and  Internal 
Government  Loan  Bonds;  State  and  City  Bonds; 
National  and  Other  Railway  Bonds;  Present  prices 
of  Bonds,  When  prices  will  rise  and  why. 

vii 


GENERAL  SURVEY  OF  FOREIGN 
EXCHANGE  POSITION. 

MANY  articles  have  been  published  lately  ex- 
plaining the  theory  of  foreign  exchange.  Most 
of  these  articles,  however,  do  not  give  the  practical 
information  which  a  prospective  buyer  of  foreign 
securities  needs.  A  long  and  intimate  knowledge  of  the 
people  and  the  industries  of  foreign  countries  is  needed 
to  enable  one  to  judge  whether  lending  money  to  these 
nations  is  safe  or  otherwise;  opinions  based  on  any- 
thing but  this  exact  knowledge  are  worthless. 

Safety  of  Investment. — The  buying  of  foreign 
securities  is  really  the  lending  of  money  abroad,  and 
the  first  and  most  important  consideration  in  the  mind 
of  the  lender  should  be  the  safety  of  his  capital. 

The  profits  offered  by  foreign  investments  at  the 
present  time  are  so  large  as  to  make  the  prudent  in- 
vestor remember  that  where  there  are  large  profits 
there  are  usually  also  large  risks. 

The  present  report  is  written  with  the  aim  of 
examining  these  risks,  and  of  explaining  clearly  the 
reason  why  it  is  possible  at  present  to  make  excep- 
tionally large  profits  on  the  highest  class  of  foreign 
bonds  and  stocks. 

Foreign  Experience. — The  writer  has  for  many 
years  been  occupied  in  making  audits  and  investiga- 
tions of  the  accounts  of  varied  kinds  of  industries  in 
the  different  countries  of  Europe  which  have  been 
affected  by  the  war.  The  advantages  of  speaking 

[1] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

their  languages  and  working  in  these  countries  for 
extended  periods  has  given  him  a  good  knowledge  of 
their  financial  resources  and  of  the  capacity  of  their 
workmen,  businessmen,  bankers  and  financiers. 

This  experience  permits  a  fairly  accurate  estimate  to 
be  made  as  to  whether  these  nations  can  repay  their 
present  indebtedness  to  investors  in  Government  and 
Municipal  loans  and  to  purchasers  of  industrial  bonds 
and  stocks. 

Credit  of  Nations. — After  all,  the  chief  bases  of 
credit  are,  first,  the  willingness  of  the  borrower  to  re- 
pay, and  next,  his  power  to  do  so.  Both  conditions 
are  necessary  in  order  to  render  the  loan  a  safe 
investment. 

Foreign  Exchange. — The  full  meaning  of  "foreign 
exchange",  and  the  influence  of  its  changes  on  trade 
and  profits,  are  stated  in  every  day  language  in  later 
pages. 

The  explanations  of  the  present  extraordinary  posi- 
tion of  the  foreign  exchanges  are  made  in  a  way  which 
will  permit  the  ordinary  business  man  or  woman  to 
understand  clearly  the  reasons  why  foreign  exchange 
is  so  cheap,  and  to  see  how  these  conditions  favor  the 
American  investor  specially.  The  profits  obtainable 
from  buying  the  securities  of  each  of  the  various 
foreign  countries  are  also  shown. 

Effect  of  Gold  Stocks  on  Credit.— The  effect  on 
foreign  exchange  rates  of  the  possession  of  large  or 
small  stocks  of  gold,  by  various  countries,  is  held  by 
many  political  economists  to  determine  their  degree  of 
solvency  and  the  rates  of  exchange  with  these  coun- 
tries. This  is  a  mistake.  Food  and  clothing,  building 

[2] 


EXCHANGE  AND  FOREIGN  BONDS 

materials,  machinery  and  tools,  and  raw  materials  for 
manufacturing  goods  for  use  and  exchange,  with 
trained  and  willing  workers,  are  much  more  valuable 
than  stocks  of  gold. 

Gold  is  certainly  good  to  have,  but  it  produces 
nothing;  workers  and  materials  produce  wealth;  bonds 
and  stocks  produce  interest,  but  gold  held  by  bankers 
is  simply  unproductive  capital,  held  as  a  guarantee  of 
credit. 

The  United  States  has  more  than  enough  gold  on 
hand,  and  American  bankers  do  not  desire  to  increase 
their  stocks  of  it;  there  is  no  profit  in  holding  it. 

The  influence  of  gold  stocks  on  international  credit 
is  greatly  over-rated.  The  chief  question  is,  can  the 
debtor  nation  pay  what  it  owes,  either  by  gold,  secur- 
ities or  goods,  or  by  paid  services  to  the  creditor  na- 
tion. If  the  debtor  nation  can  pay  promptly,  in  any 
of  these  ways,  its  credit  is  good  and  exchange  is 
normal.  If  it  is  unable  to  pay  its  debts  at  once,  and  is 
compelled  to  ask  for  delays  and  to  pay  high  interest, 
its  credit  is  impaired  and  its  money  is  at  a  discount,  no 
matter  how  rich  it  may  be.  Many  perfectly  solvent 
banks  have  been  wound  up  because  their  assets  were 
not  sufficiently  liquid  at  the  time  when  an  extraor- 
dinary strain  was  put  on  their  resources. 

PRESENT  FINANCIAL  POSITION  OF 

WARRING  NATIONS:  ALLIES 

NOT  INSOLVENT. 

With  the  single  exception  of  the  United  States,  the 
position  of  all  the  lately  warring  nations  is,  that  they 
owe  more  than  they  can  pay  promptly.  The  debtor 

13] 


HOW  TO  MAKE  MONEY  IN    FOREIGN 

nations  cannot  be  made  bankrupt.  Their  creditors 
can  only  force  their  money  to  a  discount,  by  selling 
the  debts  below  face  value  and  compelling  them  to 
pay  more  for  future  purchases,  in  order  to  provide  for 
such  losses  on  realization. 

This  separates  the  chief  nations  of  the  world  into 
two  camps;  the  first  being  the  United  States,  with  its 
dollar  at  a  premium,  and  the  second  the  European 
nations,  with  their  money  at  a  discount. 

Payment  of  War  Debts. — An  insolvent  business 
firm  which  could  not  pay  its  debts  promptly,  through 
having  suffered  large  losses,  would  usually  be  com- 
pelled to  liquidate  and  realise  all  its  resources  in  order 
to  pay  its  creditors. 

For  nations  this  is  impossible.  Their  resources  con- 
sist of  their  populations,  with  their  productive  skill  and 
facility  for  producing  values  and  profits,  joined  to  the 
natural  products  of  their  country  and  the  capital 
invested  in  works,  factories  and  shipping,  docks  and 
railways.  These  are  very  real  assets,  because  they 
produce  wealth,  but  they  cannot  be  sold  in  order  to 
pay  debts. 

The  only  remaining  means  of  payment  open  to  the 
debtor  nations  is,  therefore,  the  production  of  goods 
and  profits  from  which  to  pay  their  creditors,  and  this 
needs  time. 

Payments  Already  Made  on  Account. — The 
debtors  have  already  paid  their  chief  creditor,  the 
United  States,  as  far  as  possible,  by  shipping  gold  and 
by  returning  American  railroad  and  industrial  secur- 
ities formerly  held  by  French,  Belgian  and  British 
investors. 

14] 


EXCHANGE  AND  FOREIGN  BONDS 

Reasons  of  Present  Indebtedness. — The  Allied 
nations  have,  during  a  long  five  years,  been  fighting 
for  their  lives  and  for  the  protection  of  their  families 
and  homes.  Everything  has  been  sacrificed  to  ensure 
victory.  Men  and  women  have  been  proud  to  die  in 
defense  of  their  country.  Hard  earned  wealth  has 
been  poured  out  in  torrents,  to  obtain  the  means  of  at 
first  holding  ground  and  afterwards  of  defeating  the 
enemy.  Civilian  populations  have  willingly  half 
starved  themselves  in  order  that  their  soldiers  might 
be  well  fed.  Manufacturing  and  trading  have  had  to 
be  neglected.  A  man  attacked  by  an  armed  robber 
gives  no  thought,  during  the  fight,  to  the  work  of  to- 
morrow. Peace  having  been  now  restored,  the  victors 
have  been  busy,  first  of  all  in  repairing  the  damage 
committed  by  the  attacking  nations,  and  next,  in 
restoring  their  own  means  of  earning  a  livelihood. 
They  have  had  to  produce,  or  to  buy  from  the  U.  S. 
and  other  countries,  the  necessary  materials,  both  for 
repairs  and  replacements  and  for  producing  goods 
for  sale  to  their  own  people  and  to  other  nations. 
The  damage  suffered  by  Allied  territory  has  been  so 
extensive  that  the  work  named  has  required  consider- 
able time  and  has  made  necessary  the  borrowing  of 
huge  sums  of  money  at  high  rates  of  interest,  and  also 
the  purchase  of  materials  on  credit  at  high  prices. 
America,  and  other  nations  which  have  sold  the  ma- 
terials on  credit,  have  generally  raised  the  prices 
sufficiently  high  to  provide  for  both  the  probable  loss 
on  exchange  and  interest  for  the  long  credit. 

LAI 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

EXAMPLE  OF  EFFECT  OF  LOW  FRENCH 
EXCHANGE  RATE 

The  seller  has  worked  it  out  this  way : 

Sale  of  Goods  to  France. 

Domestic  price,  for  cash,  including 

profit $100 

ADD,  extra  profit  (owing  to  urgency 

of  demand  and  scarcity  of  supply)  50 

ADD,  interest  for  one  year,  say  10% 

on  $150..  15 


TOTAL $165 


Value  of  $165  at  normal  exchange  of 
5.18  frs.  per  $,  equal  to  19.30  cents 

per  franc Frs.     854.70 

ADD,  for  probable  loss  on  collection 
of  debt,  through  the  discount  on 

French  exchange,  200% 1709.40 

(Francs  are  estimated  to  be  sale- 
able at  7  cents  each,  instead  of 
the  normal  rate  of  19.30  cents.) 


TOTAL    INVOICE    PRICE    TO 

FRENCH  BUYER  (in  francs) ..  Frs.  2,564.10 

The  seller  takes  a  bill  of  exchange  in  payment, 
due  in,  say,  12  months,  and  sells  it  to  an  American 
banker  at  7  cents  to  the  franc,  realising  $179.48, 
which  shows  him  a  good  profit  on  cost. 

The  banker  sells  the  bill  in  New  York  for 

[6] 


EXCHANGE  AND  FOREIGN  BONDS 

per  franc,  and  makes  $12.82  profit.  A  buyer  who  holds 
the  bill  for  12  months  and  sells  it  then,  at  anything 
between  8  cents  to  the  franc  and  the  normal  rate  of 
19.3  cents,  would  also  make  a  good  profit.  If  the 
French  buyer  gives  French  Government  Bonds, 
instead  of  a  bill  of  exchange,  the  effect  is  the  same. 

Who  is  the  Loser? — The  only  man  who  loses  is 
the  French  buyer,  who  has  paid  nearly  three  times 
the  usual  price,  but  he  is  compelled  to  buy  in  order 
to  find  work  for  his  men  and  his  machinery;  he  can- 
not get  his  materials  elsewhere  at  present. 

It  can  be  easily  seen  that  conditions  like  these 
make  French  trade  with  the  U.  S.  almost  impossible. 

Even  without  charging  extra  for  credit,  American 
goods  cost  French  buyers  $2.50,  at  present  low 
exchange  rates,  as  compared  with  $1,  which  they 
would  cost  at  normal  exchange. 

Method  of  Improving  European  Exchange 
Rates. — The  only  way  in  which  the  United  States  can 
hasten  the  improvement  of  exchange  is,  by  purchas- 
ing European  Government  securities,  or  by  investing 
in  the  bonds  and  stocks  of  the  industries  of  those 
countries. 

Profits  on  European  Investments,  Slow,  but 
Sure. — The  profits  to  be  obtained  from  such  invest- 
ments, if  wisely  made,  are  very  large,  and  the  invest- 
ments are  safe  and  sound.  The  investor  should  be 
warned,  however,  that  these  profits  cannot  be  made 
with  the  same  rapidity  as  dealings  in  American  secur- 
ities, and  no  one  should  invest  in  foreign  securities  any 
money  which  he  is  likely  to  need  quickly,  or  at  any 
time  within  at  least  a  year. 

(71 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

Example  of  Netherlands  Investors. — Although 
the  securities  may  have  to  be  held  for  so  long  a  time, 
the  profits  would  be  certain.  The  people  of  the 
Netherlands  are  amongst  the  shrewdest  judges  of 
investments  in  the  world ;  they  will  not  buy  unsound 
securities  at  any  price,  but  they  will  always  buy  really 
good  bonds  and  stocks  during  times  of  depression. 
The  Hollander  is  in  no  hurry  to  realise,  his  belief  being 
that  sound  securities  will  always  come  back  to  their 
proper  value ;  relying  on  this  he  makes  more  than  the 
average  rate  of  profit,  and  has  very  few  losses. 

DOUBLE  PROFITS  REALISED  BY 
IMPROVEMENT  OF  EXCHANGE. 

THERE  are  really  two  separate  profits  to  be  made 
by  buying  foreign  securities  at  present  prices. 
Take  the  case  of  a  Government  bond  quoted  in  Lon- 
don in  peace  times  at  £100.  The  equivalent  price 
in  New  York,  with  the  pound  sterling  at  par,  ($4.87) 
would  be  $487.  With  the  exchange  rate  per  pound 
sterling  reduced  to  $3.60,  the  £100  Bond  would  cost 
only  $360,  a  reduction  of  over  25%  to  the  American 
purchaser.  On  the  recovery  of  the  exchange  to  par, 
this  would  give  a  clear  profit  of  over  30%  on  the 
principal,  and  also  of  over  30%  on  the  difference  in 
the  exchange,  namely,  $127  profit  on  the  investment 
of  $360,  equal  to  35%  on  the  outlay.  The  interest 
payable  on  the  bond  will  meanwhile  have  yielded 
another  profit. 

Reason  for  High  Profits.— At  the  present  time 
many  of  the  best  European  securities  are  standing 
considerably  below  par  in  their  own  countries. 

[83 


EXCHANGE  AND  FOREIGN  BONDS 

Profits  on  French  Government  5%  Bonds. — For 

example,  the  French  Government  Victory  Loan  5% 
Bond  for  1 ,000  francs  can  be  purchased  at  present  for 
around  $62,  the  French  franc  being  quoted  in  New 
York  at  7  cents  instead  of  its  former  value  of  19  3  /10 
cents. 

At  the  normal  exchange  of  19  3/10  cents  per  franc, 
this  bond  would  realise  $193.00,  if  sold  at  face  value. 

Here  is  the  reason  for  the  extraordinary  profit. 

On  Aug.  30,  1920,  the  French  5%  Government 
Loan  was  quoted  on  the  Paris  Bourse  at  frs  87.50. 
The  U.  S.  dollar  was  then  quoted  in  Paris  as  worth 
14  francs  52 }/%  centimes. 

This  means  that  a  French  Government  5%  Bond 
for  frs  1,000  could  be  bought  in  Paris  for  10  times  frs 
87.50,  making  frs  875.  In  normal  times,  French 
Government  Bonds  cannot  be  bought  at  prices  which 
will  yield  more  than  3J/£%  to  4%.  It  is  practically 
certain  that  these  bonds  will  rise  to  a  premium,  that 
is,  to  a  selling  price  of  over  1,000  francs  per  frs  1,000 
Bond. 

The  French  investor's  profit  would  be  limited  to  the 
difference  between  the  present  and  future  market 
price,  say  125  francs,  but  on  this  profit  he  would  have 
to  pay  a  heavy  income  tax. 

Special  Advantages  of  American  Investors. — 
The  case  is  quite  different  with  the  American  investor. 
Owing  to  the  premium  on  dollars,  the  French  bond  of 
frs  1,000  quoted  875  francs,  can  be  bought  from  New 
York  for  $60.24  plus  brokerage  and  commission 
charges,  say  a  total  of  $62.  At  the  former  normal 
exchange  of  19.3  cents  for  the  franc,  this  bond,  now 

19] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

purchasable  at  $62  would  have  cost  $168.87,  or,  plus 
brokerage  and  commissions,  say  $170.  The  pros- 
pective profit  to  the  American  buyer,  when  exchange 
rises  to  the  normal  rate,  is  therefore,  say  $169  net 
selling  price  (brokerage,  etc.,  deducted),  less  cost 
$62,  making  $107  net  profit,  being  over  172%  on  the 
capital  invested. 

Note  also  that  the  American  pays  no  income  tax  in 
France  on  this  profit,  nor  on  the  interest  received  on 
the  Bond. 

When  Will  French  Exchange  Improve?— The 
restoration  of  the  French  exchange  to  the  normal 
rate  of  19.3  cents  per  franc  may  take  2  or  even  3 
years,  and  it  will  be  gradual,  with  occasional  jumps. 
If  the  bond  is  held  for  3  years,  the  profit  of  $107 
would  be  over  57%  per  annum  (increase  in  the  princi- 
pal receivable),  plus  5%  per  annum  interest  on  the 
bond,  total  62%  per  annum.  But  this  is  not  all  of 
the  profit  to  be  obtained  by  the  American  investor. 

Additional  Profits  by  Rise  in  Market  Price  of 
Bonds.— The  total  profit  of  $107  realisable  by  the 
rise  in  exchange  is  based  on  the  present  low  market 
quotation  for  the  bond.  A  rise  in  the  market  price 
of  the  bonds  to  par,  showing  a  yield  of  5%  interest, 
would  give  an  aditional  $22.50  profit  at  normal 
exchange,  while  a  rise  to  25%  premium,  putting  the 
bonds  on  a  4%  basis,  would  increase  the  profits  by 
over  $70  at  normal  exchange. 

Taking  Quick  Profits.— The  American  investor 
can  sell  his  Bonds  at  any  time  and  profit  by  the  im- 
provement in  exchange  up  to  that  date. 

Each  rise  of  1  cent  in  francs  gives  a  profit  of  $10 

[101 


EXCHANGE  AND  FOREIGN  BONDS 

on  the  1,000  franc  bond;  a  rise  from  7}^  cents  to  15 
cents  per  franc  would  give  $75  profit,  or  100%. 

Profits  on  British  Government  Bonds. — British 
securities  also  offer  good  profits,  although  not  so  large 
as  on  French  securities,  they  are  likely  to  be  realised 
more  speedily. 

The  reasons  for  the  unusual  profits  on  purchases  of 
foreign  securities  having  been  explained,  the  next 
step  is  to  consider  the  solvency  of  the  respective 
countries  and  the  safety  of  the  different  securities. 

POINTERS— GENERAL 

The  American  Express  Company  has  recently 
added  to  its  other  business  that  of  dealing  in  foreign 
exchange  and  foreign  securities.  It  is  reported  to  be 
making  money  rapidly  in  these  new  lines,  and  its 
shares  have  risen  in  price,  as  a  consequence. 


Many  people  try  to  get  riches  very  quickly  from 
investments,  without  taking  any  risk.  It  cannot  be 
done  in  ordinary  times.  Wise  investors,  like  the 
Dutch,  buy  good  investments  when  they  are  cheap 
and  wait  for  the  sure  profit  obtainable  by  their  return 
to  real  values. 

The  reason  why  foreign  bonds  and  stocks  can  be 
bought  cheaply  at  present  is  that  the  foreign  holders 
can  get  a  higher  return  by  using  the  money  in  trade 
and  manufacturing.  When  money  used  in  trade  is 
yielding  double  the  rate  received  on  investments, 
these  investments  are  worth  only  50%  as  compared 
with  loose  money,  because  it  would  take  $200  in- 
vested to  bring  the  same  profit  as  $100  used  in  trade. 

[11] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

In  May,  1919,  the  Savings  Bank  section  of  the 
American  Bankers'  Association  adopted  a  resolution 
that  a  bill  be  prepared  for  submission  to  all  State 
legislatures  authorising  savings  banks  to  invest  in 
high  grade  foreign  bonds. 

Several  states  have  already  passed  bills  to  authorise 
savings  banks  to  invest  10%  of  their  deposits  and 
surplus  in  French  and  Canadian  Government  and 
provincial  bonds,  etc. 


Trade  follows  investments.  American  investments 
in  Argentina  grew  from  20  million  dollars  in  1913  to 
65  million  dollars  in  1917;  American  exports  to  that 
country  grew  from  14.9  to  36.3  per  cent  of  Argentina's 
total  purchases  during  the  same  period. 


12] 


EXCHANGE  AND  FOREIGN  BONDS 

AN  EXPLANATION  OF  FOREIGN 
EXCHANGE 

THE  reason  for  the  money  of  Britain,  France, 
Belgium  and  Italy  being  at  a  large  discount,  as 
compared  with  the  dollar,  may  be  explained  by  stating 
it  as  an  ordinary  business  matter,  which  it  really  is. 

Domestic  Money. — The  government  of  each 
nation  makes  a  profit  on  the  silver,  copper,  and  nickel 
coins,  which  it  holds  the  monopoly  of  making  and 
selling  to  its  citizens,  for  use  within  their  own  country. 

These  coins  usually  cost  about  one-third  of  the 
price  at  which  the  government  sells  them  to  the  public 
and  laws  are  passed  compelling  all  citizens  to  accept 
this  domestic  money  at  the  full  rates  marked  on  the 
coins.  The  government  profit  is  used  to  pay  national 
expenses.  Naturally  each  government  wishes  to  keep 
this  profitable  trade  free  from  competition  in  its  own 
territory,  so  the  use  of  silver  and  copper  coins  of 
other  nations  is  forbidden.  This  prevents  domestic 
silver  and  copper  coinage  being  of  use  for  payments 
to  be  made  for  goods  bought  from  other  countries. 

International  Money. — It  is  necessary,  therefore, 
to  have  some  kind  of  international  money  which  will 
be  accepted  by  all  nations.  Gold  has  been  fixed  on 
as  the  international  money,  and  it  is  used  generally 
for  both  domestic  and  foreign  payments.  No  profit 
is  made  on  gold  coinage,  the  coins  are  sold  to  the 
public  at  cost  price. 

The  Fixed  Buying  Price  for  Gold.— In  peace 
times  there  is  a  fixed  price  for  gold;  the  British  Em- 

"[13] 

* 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

pire  produces  the  largest  quantity  of  it  from  the 
mines  under  its  control. 

Bank  Purchases  of  Gold.— By  agreement  with 
the  British  Government,  the  Bank  of  England  is 
compelled  to  buy  all  gold  offered  to  it  at  the  rate  of 
77  shillings  and  9  pence  per  ounce  (Troy  weight)  for 
"standard"  gold,  fj  pure,  equal  to  nearly  85  shillings 
($20.67)  per  oz.  of  pure  gold. 

How  Gold  Coins  Are  Sold  at  Cost.— The  British 
Mint  (owned  by  the  Government)  makes  gold  into 
British  coins,  called  the  "sovereign,"  and  the  "half- 
sovereign,"  which  are  issued  to  the  public  at  net 
cost,  at  the  rate  of  77.10^d.  per  ounce  of  the  "stand- 
ard" gold  contained  in  them. 

Three  cents  (1}^  pence)  per  ounce  is  included  in 
this  price  as  the  expense  of  making  the  coins. 

Alloys. — In  the  process  of  coining  British  gold 
pieces,  a  harder  metal,  called  an  "alloy",  is  mixed 
with  the  gold  in  the  proportion  of  y2  of  alloy  to  ^  of 
pure  gold ;  this  is  to  prevent  excessive  wearing  of  the 
coins  during  their  use  as  money. 

Variations  in  Price  of  Gold.— The  Bank  of  France 
buys  pure  gold  at  practically  the  same  price  as  the 
Bank  of  England.  The  French  Government  makes 
this  into  gold  20  franc  pieces,  which  it  issues  to  the 
French  public  at  the  exact  cost  of  production.  Other 
governments  do  the  same  for  their  gold  coins. 

These  standard  buying  rates  of  the  Bank  of  England 
and  the  Bank  of  France  keep  the  price  of  gold  prac- 
tically steady  as  regards  all  nations,  because  the 
greater  part  of  the  gold  produced  from  foreign  mines 
is  sold  to  the  two  banks  named. 

1141 


EXCHANGE  AND  FOREIGN  BONDS 

Use  of  Gold  for  Jewelry,  etc. — Most  govern- 
ments forbid  manufacturers  of  gold  articles  to  melt 
down  gold  coins;  these  manufacturers  are  compelled 
to  buy  the  gold  they  need  in  the  raw  state,  that  is,  in 
ingots  or  gold  blocks,  called  "bullion",  which  are 
certified,  after  analysis,  to  be  of  a  certain  average 
degree  of  purity. 

At  times  the  competition  amongst  manufacturers 
forces  prices  slightly  above  the  fixed  price  offered  by 
the  Bank  of  England  and  the  Bank  of  France,  but 
this  does  not  affect  gold  values  permanently. 

Valueing  Foreign  Coins  to  Fix  Exchange  Rates. 
— In  order  to  determine  the  value  of  a  foreign  gold 
coin,  it  is  necessary  to  know  its  fineness,  that  is,  the 
proportion  of  pure  gold  it  contains,  which  does  not 
vary,  each  nation  having  adopted  a  certain  declared 
proportion  of  pure  gold  to  be  contained  in  its  gold 
coins. 

Comparison  of  U.  S.,  French  and  British  Gold 
Coinage  Values. — A  comparison  of  the  British  £1 
coin,  ^  pure,  with  the  French  20  franc  gold  coin, 
^  pure,  shows  the  value  of  the  pure  gold  metal 
contained  in  these  coins  to  be  in  the  proportions  of 
£1  to  25  francs  22  centimes.  Stated  briefly,  and 
eliminating  decimals,  £100  in  British  gold  coins  are 
equal  in  pure  gold  contents  to  2,522  francs,  or  to 
126  and  \  French  gold  pieces  of  20  francs  each. 

The  United  States  gold  coins  are  -^  pure  gold,  and, 
in  proportion  to  the  $10  gold  coin,  the  £1  gold  piece 
is  worth  $4.8665,  roughly  $4  and  S6%  cents. 

Normal  Rates  of  Foreign  Exchange  for  Coins  of 
Chief  Nations. — Valued  on  the  basis  of  the  pure 

[IS 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

gold  contained  in  the  gold  coins  of  the  various  foreign 
countries  these  coins,  when  sent  to  the  U.  S.  in  pay- 
ment for  goods  exported,  would  be  accepted  at  the 
amounts  stated  below.  These  are  called  the  "normal 
exchange  rates",  or  "par  rates",  or  "mint  par  of 
exchange." 

Par  Values.— B ritain,  the  £1  is  worth  in  gold, 
$4.86%  cents. 

France,  the  1  franc,  on  the  basis  of  the  gold  piece  of 
20  francs,  is  worth  19^  cents. 

France,  Belgium,  Italy  and  Greece  have  by  agreement 
formed  a  group  called  the  "Union  Latine" ;  they  under- 
take to  make  their  gold  and  silver  coins  of  equal  value ; 
they  further  agree  to  each  permit  the  coins  of  the  other 
countries  of  the  Union  Latine  to  circulate  in  their 
respective  territories  at  face  value.  The  standard 
coin  in  each  country  is  the  same,  called  in  France, 
Belgium  and  Switzerland,  the  "franc",  in  Italy  the 
"lira"  and  in  Greece  the  "drachma".  The  1  fr.,  2  fr. 
and  5  fr.  coins  are  silver.  The  smallest  gold  coins  are 
10  fr.  and  20  fr.  At  present  this  agreement  is  prac- 
tically suspended  because  the  monies  of  the  countries 
named  are  quoted  at  widely  different  values. 

Germany,  on  the  basis  of  the  gold  piece  of  20  marks, 
the  mark  is  worth  in  gold,  23.82  cents. 

Japan,  the  yen  is  worth  in  gold,  49.85  cents ;  roughly, 
half  a  dollar. 

Methods  of  Settlement  of  International 
Debts. — So  long  as  trading  between  nations  is  normal, 
accounts  between  them  are  settled  on  the  basis  of 
the  rates  of  gold  exchange  named  above.  The  inter- 
national bankers  act  as  clearing  houses  for  the  debts 

[16] 


EXCHANGE  AND  FOREIGN   BONDS 

payable  and  receivable  by  their  different  countries; 
the  mutual  debts,  in  peace  times,  generally  nearly 
balance  each  other ;  differences  are  paid  by  the  transfer 
of  other  international  debts  or  by  the  shipment  of 
gold,  either  in  the  form  of  "bullion"  (gold  blocks)  or 
gold  coins  of  the  creditor  country  or  of  other  nations, 
which  are  accepted  at  the  standard  values  named 
above  (See  also  page  21). 

Business  firms  do  not  send  gold  abroad  nor  receive 
payment  in  gold  from  foreign  countries,  foreign  busi- 
ness debts  are  paid  by  drafts  issued  by  bankers,  or  by 
bills  of  exchange,  payable  after  3,  6,  or  9  months, 
which  are  usually  sold  to  bankers. 

War  Changes:  Suspension  of  Payments  in 
Gold. — The  war  has  changed  all  this  for  a  time. 
Formerly  each  nation  bought  from  abroad  only  what 
it  could  pay  for  by  its  sales  abroad,  and  by  income 
receivable  on  its  foreign  investments,  or  for  work 
done  for  foreign  nations.  The  necessities  of  war 
compelled  the  Allied  Powers  (England,  France, 
Belgium  and  Italy),  and  the  Central  Powers  (Germany 
and  Austria),  to  cease  selling  abroad,  and  forced  them 
to  buy  enormously  of  foreign  materials  and  food. 
Gold  and  securities  were  at  first  given  in  payment  for 
these  purchases  (made  chiefly  from  the  U.  S.),  and 
when  these  funds  were  exhausted,  further  materials 
were  bought  on  credit.  Each  of  the  European  nations 
is  now  holding  fast  to  its  small  stock  of  gold,  and  has 
forbidden  its  exportation  in  bulk.  Meanwhile,  the 
U.  S.,  as  the  principal  creditor,  has  considerable  sums 
to  collect,  and  refuses  to  supply  further  credit  to 
European  nations  except  at  increased  prices. 

[17] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

American  Credit  Prices  Increased. — In  effect, 
as  regards  Britain,  the  American  selling  terms  are 
for  gold  $1,  on  credit  $1.30,  for  present  dealings.  For 
France,  the  American  terms  are  gold  $1,  on  credit 
$2.50. 

European  Indebtedness  to  U.  S. — The  large 
accumulation  of  accounts  owing  to  the  U.  S.  by  both 
France  and  Britain  will  require  a  few  years  of  hard 
work  and  strict  economy  on  their  part  in  order  that 
they  may  clear  off  the  debts  from  their  trading  profits. 

European  Debts  Offered  Cheaply.— American 
bankers,  who  are  dealers  in  these  debts,  are  willing  to 
sell  them  to  buyers  in  New  York  at  a  considerable 
reduction  for  prompt  cash. 

How  Profits  May  Be  Made  in  Buying  Them.— 
For  each  $1  paid  now  by  an  American  investor  in 
New  York,  he  will  receive  credit  for  $1.30  in  London 
at  standard  gold  rates,  or  a  credit  of  French  money  in 
Paris  equal  to  $2.50  at  standard  gold  rates.  By  wait- 
ing a  few  years,  until  Britain  and  France  are  able  to 
pay  their  debts  in  gold,  these  standard  gold  rates 
would  be  actually  received  as  a  return  for  the  $1  paid 
now. 

Instead  of  waiting,  the  credits  can  be  used  to  buy 
British  or  French  Government  Bonds  at  once,  these 
bonds  paying  good  interest  and  being  purchaseable 
at  a  considerable  discount  on  face  values.  By  holding 
the  bonds  for  the  few  years  needed  for  Britain  and 
France  to  pay  a  portion  of  their  war  debts  from  trading 
profits  and  other  income,  the  investor  will  be  able  to 
realise  much  more  than  the  sums  invested,  and  will, 
meanwhile,  have  a  steady  and  increasing  income  from 

[18] 


EXCHANGE  AND  FOREIGN  BONDS 

interest.  This  would  give  a  double  profit,  namely,  a 
profit  by  the  rise  in  the  market  price  of  the  bond  and 
a  profit  by  the  rise  in  exchange  rate. 

Risks  Involved. — The  question  may  be  asked,  is 
there  any  risk  in  waiting  for  the  exchange  coming 
back  to  the  standard  rates?  Is  it  not  possible  that 
British  and  French  money  may  never  return  to  the 
former  gold  rates? 

Every  banker  and  every  American  exporter  will 
give  the  same  answer  to  these  questions.  Both 
Britain  and  France  are  not  only  solvent  but  have  a 
huge  excess  of  wealth  beyond  their  present  liabilities 
to  the  United  States  and  other  countries. 

Reasons  Why  No  Risk  of  Loss  Exists. — It  is 
impossible  for  either  Britain  or  France  to  continue  to 
exist  as  leading  nations,  or  to  continue  their  foreign 
trade,  without  ultimately  bringing  their  exchange 
rates  back  to  the  gold  standard  rates  which  were  in 
force  before  the  war.  Only  the  destruction  of  both 
countries,  with  all  their  colonies,  could  prevent  this 
result  being  achieved. 

Time  Required  for  Realising  Full  Profits.— 
The  only  doubtful  point  is,  how  long  will  this  take — 
how  long  will  it  be  necessary  for  an  American  investor 
to  hold  British  or  French  bonds,  for  example,  to 
realise  the  full  profits  on  them? 

Judging  from  the  progress  already  made  by  both 
countries  towards  recovery  of  their  former  financial 
strength,  it  appears  probable  that  British  and  Belgian 
exchange  will  return  to  par  (the  standard  gold  rate) 
in  less  than  3  years,  and  French  exchange  will  return 
to  par  within  five  years. 

[19] 


HOW  TO  MAKE   MONEY   IN   FOREIGN 

Realising  With  Part  of  Profits.— Meanwhile  the 
rates  will  improve  from  now  onwards,  and  the  profits 
accrued  may  be  realised  on  any  improvement  taking 
place. 

Example  from  American  History. — At  the  time 
of  the  American  Civil  war  the  same  conditions,  as 
regards  exchange,  existed  here;  American  money  was 
at  a  considerable  discount  and  great  profits  were  made 
by  European  investors  buying  American  exchange  and 
using  the  credits  to  buy  the  depreciated  U.  S.  bonds 
and  stocks.  These  were  sold  later  at  much  higher 
market  prices,  and  the  restoration  of  U.  S.  exchange 
to  par  rates  gave  additional  profits.  The  U.  S.  dollar 
was  down  to  40c.  during  that  war. 

French  Parallel  Case.— In  1870-1871  similar  con- 
ditions applied  to  French  exchange;  credits  in  Paris 
could  be  bought  much  lower  than  they  are  to-day,  but 
the  exchange  rates  returned  to  the  standard  rate  in  a 
few  years,  and  remained  steady  until  1914. 

Baron  Rothschild's  Advice. — There  is  the  well 
known  story  of  one  of  the  members  of  the  Rothschild 
family  who,  at  the  end  of  the  1870  war,  advised  a 
friend  to  buy  French  government  securities.  The 
friend  remarked,  "but  francs  are  quoted  a  few  cents 
each,  and  the  streets  of  Paris  are  running  with  blood." 
The  reply  was,  "Yes,  I  know,  but  that  is  why  francs 
are  quoted  a  few  cents  each,  buy  French  Government 
Bonds  now." 

The  annexed  table  of  the  gold  values  of  the  various 
foreign  monies  shows  the  rates  at  which  these  stand 
in  peace  times. 

Each  month  sees  progress  made  towards  the  restora- 
tion of  exchange  rates  to  these  gold  values. 

[20] 


EXCHANGE  AND  FOREIGN  BONDS 


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HOW  TO   MAKE  MONEY   IN   FOREIGN 


THE  PRESENT  PRICE  OF  GOLD  —  ITS 

EFFECTS  ON  FOREIGN 

EXCHANGE  RATES 

IT  has  already  been  explained  that  the  Bank  of 
England  and  the  Banque  de  France  buy  pure  gold 
at  the  rate  of  $20.67  per  ounce  of  Troy  weight. 

Why  Governments  Are  Not  Now  Issuing  Gold. 
— The  American  and  other  governments  pay  the  same 
price;  they  cannot,  in  fact,  pay  more,  because  they  are 
bound  in  honor  to  make  their  gold  coins  always  con- 
tain the  same  weight  of  pure  gold. 

If  any  one  government  pays  more  than  $20.67  per 
ounce  for  pure  gold  it  will  lose  money,  because,  by 
agreement  with  other  nations,  it  can  only  charge  at 
the  rate  of  $20.67  per  ounce  of  pure  gold  contents  for 
the  gold  coins  it  makes. 

Issues  of  Gold  Coins  of  Reduced  Values. — It 
may  be  asked,  "but  why  not  reduce  the  quantity  of 
pure  gold  in  the  coins,  if  the  price  of  gold  increases". 
This  way  has  been  tried  by  various  countries,  hundreds 
of  years  ago,  and  it  has  always  brought  disaster. 

The  effect  in  the  U.  S.,  for  example,  would  be  as 
follows:  If  the  pure  gold  in  the  $10  piece  (worth 
$9.97  at  the  rate  of  $20.67  per  ounce  Troy)  were  to  be 
reduced  by  half,  the  new  gold  $10  coins  would  only 
be  worth  $5  each,  as  compared  with  the  old  coins  of 
the  same  value. 

[22] 


EXCHANGE  AND  FOREIGN  BONDS 

Immediately  the  public  and  the  bankers  were  in- 
formed that  the  new  $10  gold  pieces  were  to  contain 
less  gold,  all  the  old  $10  coins  would  disappear  from 
circulation,  because  everyone  who  had  them  would 
hoard  them;  they  would  be  considered  as  now  worth 
$20  each. 

Foreign  nations  would  only  accept  the  new  $10 
pieces  as  worth  $5  each,  so  goods  imported  from 
abroad  would  cost  about  double  the  former  prices. 

How  Rates  of  Exchange  Are  Fixed. — For  inter- 
national /payments,  the  values  of  foreign  gold  coins 
are  still  the  same  as  before  the  war.  But  the  price  of 
gold,  in  the  paper  money  or  bills  of  exchange  of  for- 
eign nations,  has  risen.  The  foreign  governments 
have  commandeered  all  gold  and  have  forebidden 
their  bankers  and  traders  to  send  it  abroad. 

Foreign  creditors  can,  therefore,  only  be  paid  in 
paper  money,  goods  or  services,  or  they  can  wait  for 
payment  of  the  debts.  The  values  of  such  debts  are 
the  prices  at  which  they  can  be  sold  to  bankers  and 
investors.  These  prices  are  determined  by  the  credit 
of  the  debtors,  the  supply  and  demand  of  debts 
offered  for  sale,  and  the  estimated  time  of  waiting  for 
payment  in  full,  that  is,  the  time  needed  before  the 
debtor's  country  will  be  able  to  resume  payments  of 
trade  debts  in  gold. 

The  market  quotations  for  buying  these  debts  are 
called  the  "current  rates  of  exchange".  These  cur- 
rent rates  are  taken  as  the  basis  for  quoting  prices  to 
foreign  buyers  of  American  goods  or  gold. 

Premium  on  Gold. — The  present  rate  of  ex- 
change with  Britain  is  $3.50  per  £1.  Pure  gold 

231 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

(1000  fine)  is  quoted  in  New  York  at  $20.67  per  oz. 
Troy.  This,  at  the  exchange  of  $3.50,  is  equal  to 
118  shillings  per  oz.  in  London.  At  the  normal  ex- 
change of  $4.87  the  gold  would  have  cost  85  shillings. 
Therefore,  American  gold  is  worth  about  40%  more 
in  London.  That  is  why  British  Government  Bonds 
can  be  bought  with  American  money  at  40%  below 
usual  prices. 

As  regards  France,  an  exchange  rate  of  7  cents  per 
franc  (142/7  frs.  per  $1)  instead  of  the  usual  rate  of 
19.3  cents  (5.18  francs  per  $1),  would  make  the 
present  price  of  American  gold  francs  295.28  per  oz. 
Troy,  instead  of  the  normal  rate  of  francs  107.07. 
American  gold  in  Paris  would  thus  be  worth  175% 
more,  2%  times  the  usual  value.  That  is  why  French 
Government  Bonds  can  be  bought,  with  U.  S.  money, 
at  about  one-third  of  their  value. 

Illustration  of  Effects  on  Foreign  Trade  of  the 
U.  S. — Now  let  us  see  how  it  works  for  selling  goods. 
A  French  manufacturer  asks  an  American  engineering 
firm  to  quote  a  price  for  a  machine  delivered  at  a 
French  seaport.  Before  quoting,  the  American  firm 
asks  whether  payment  will  be  made  in  French  gold  or 
by  a  draft  payable  in  dollars  in  New  York.  The 
Frenchman  replies  that  he  cannot  pay  in  French  g©ld 
pieces  because  they  are  unobtainable  at  present  and 
that,  even  if  he  could  get  them,  the  French  govern- 
ment has  forbidden  their  export.  He  also  states  that 
he  has  no  funds  in  New  York,  and  that  he  can  only 
pay  in  Paris,  and  in  francs. 

On  referring  to  the  rates  of  exchange  published  in 
the  New  York  newspapers,  the  American  finds  that  a 

[24] 


EXCHANGE  AND  FOREIGN  BONDS 

franc  in  Paris  is  now  worth  only  7  and  x/s  cents, 
although  it  was  worth  193/IO  cents  before  the  war. 

As  the  American  has  no  use  for  francs  in  Paris,  he  ar- 
ranges that  his  New  York  banker  shall  buy  the  French 
money  from  him  at  the  rate  of  71  /s  cents  per  franc. 

Now  the  selling  price  has  to  be  fixed  on  those  terms. 
This  is  how  it  is  done : 

THE  PROFIT  OF  THE  AMERICAN 
MANUFACTURER 

Price  of  the  machine  at  New  York,  in- 
cluding usual  profit $10,000.00 

Packing,  ocean  freight  and  other  ex- 
penses, paid  at  New  York 2,000.00 

Add  10%  profit  on  packing,  etc 200.00 

Cash  price  of  machine,  delivered  at 

French  Port $12,200.00 

The  above  is  the  amount  the  manufacturer  ought  to 
receive  in  New  York. 

He  must  calculate  what  amount  in  francs  must  be 
charged  to  the  French  buyer  in  order  to  produce 
$12,200  when  the  debt  is  sold  to  the  banker  in  New  York. 

Price  of  Goods  at  Normal  Exchange  Rates. — 
Before  the  war  this  calculation  would  have  been  easy 
because,  at  the  normal  or  gold  rate  of  exchange,  each 
dollar  was  worth  5.18  francs,  equal  to  19.3  cents  per 
franc  (100  cents  divided  by  19.3). 

The  total  receivable  would  then  have  been  $12,200 
multiplied  by  5.18,  or  63.196  francs.  This  debt  could 
have  been  sold  to  a  banker  in  New  York  for  $12,200, 
less  a  small  charge  for  commission  and  interest. 

[25] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

Price    at    Present    Rate    of    Exchange. — The 

present  price  of  7x/s  cents  per  franc  is  equal  to  13.89 
francs  per  dollar  (100  divided  by  7I/S).  Multiplying 
$12,200  by  13.89  will  give  the  number  of  francs  which 
should  be  charged,  being  169.458  francs. 

Comparison  of  Pre-war  and  Present  American 
Export  Prices. — Here  is  a  comparison  of  the  prices 
(1)  before  the  war,  and  (2)  now,  as  seen  by  the  French 
buyer: 

THE  LOSS  BY  THE  FRENCH  BUYER 

Price  of  Machine  Delivered  at  French  Port 


(1)  Before  the  War. 

Machine  invoiced  $12,200,  at  ex- 
change of  19.3  cents  per  franc.. .   63,196  francs 

(2)  Now,  September,  1920. 
Machine  invoiced  $12,200,  at  ex- 
change of  7z/s  cents  per  franc. .    169,458  francs 

Increase  in   Price,   through   low  ex- 
change rates  in  1920 106,262  francs 

(American  price  of  $12,200  unchanged). 
Percentage  of  Increase  in  Price 168% 

Why  America  Is  Losing  Export  Orders. — The 

Frenchman,  seeing  this  greatly  increased  price,  will 
not  buy  American  machines  if  he  can  possibly  obtain 
them  from  any  of  the  European  nations  whose  ex- 
change rates  are  also  at  a  discount,  like  his  own.  Ow- 
ing to  the  increased  cost  due  to  the  premium  on  the 
American  dollar,  none  of  the  European  nations  can 
afford  to  buy  American  goods  unless  compelled  to  do 

so  by  sheer  necessity. 

[26] 


EXCHANGE  AND   FOREIGN   BONDS 


HOW  MONEY  IS  ACTUALLY  MADE  IN 
FOREIGN  EXCHANGE 

IT  has  been  shown  that  the  American  exporter  lost 
nothing  on  exchange,  when  selling  machinery  to 
France,  because  he  charged  sufficient  to  cover  the  loss 
caused  through  having  to  sell  the  debt  receivable  at 
a  large  discount. 

Profits  Made  by  Bankers  on  Foreign  Exchange 
Dealings. — The  banker  of  New  York,  to  whom  he 
has  sold  the  169.458  francs  at  7r/s  cents  per  franc,  may 
either  hold  the  amount  to  his  credit  in  Paris  or  he  may 
sell  it  in  New  York.  Bankers  prefer  to  sell  quickly, 
at  a  profit,  because  they  must  not  lock  up  their  cap- 
ital. They  could  buy  French  securities  in  Paris  with 
the  francs  standing  to  their  credit,  but  this  also  would 
lock  up  their  funds.  It  is  only  an  investor,  using  his 
own  spare  capital,  who  can  safely  wait  for  a  rise  in 
exchange. 

At  this  season  of  the  year  large  purchases  of  food- 
stuffs are  made  by  Europe  from  America,  and  this  has 
the  effect  of  increasing  considerably  the  debts  receiv- 
able by  the  U.  S.  The  bankers  have  more  debts  to 
sell  than  usual,  and  they  are  willing  to  sell  cheaper. 

This  is  the  opportunity  of  the  investor  with  loose 
capital. 

The  Banker  who  bought  the  French  debt  of  169.458 
francs  at  7x/s  cents  per  franc  sells  it  to  an  investor  at 
say  7J^  cents,  two  weeks  later.  His  deal  yields  him 
a  net  profit,  thus: 

[27] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

EXAMPLE  OF  PROFIT  OF  THE  NEW  YORK 
BANKER 


Purchase  of  169.458  francs  at  7X/S 

cents .  $12,200.00 

Interest,  half  month  at  6%  per 

annum..  30.50 


Total  cost  to  the  Banker $12,230. 50 

Sale  of  169.458  francs  at  7^  cents.. . .   12,709.30 


The  Banker's  Net  Profit,  in  two  weeks       $478 . 80 

The  profit  made  seems  small,  but  if  the  banker  turns 
his  money  over  at  a  similar  profit,  every  two  weeks  of 
the  year,  he  would  make  26  times  $487.80,  or  a  total 
of  $12,448.80  profit  on  $12,200  of  capital,  over  102% 
per  annum.  This  is  better  even  than  holding  the 
francs  for  a  rise  in  exchange. 

Profits  to  Be  Made  by  Investors. — Let  us  next 
consider  the  profit  to  be  made  by  the  American  in- 
vestor who  buys  the  debt  from  the  banker  at  7J/£ 
cents  per  franc. 

There  are  two  ways  in  which  he  can  make  a  profit 
on  the  debt. 

First  Way. — He  can  leave  the  amount  to  his  credit 
at  the  Paris  bank  and  sell  it  when  the  exchange  goes 
higher;  the  interest  allowed  by  the  Bank  would  prob- 
ably be  3%  per  annum. 

If  the  exchange  goes  up  to  10  cents  per  franc,  6 
months  later,  he  would  make  2%c  profit  on  each 
franc,  on  a  cost  of  7^c,  thus: 

[28) 


EXCHANGE  AND  FOREIGN  BONDS 

EXAMPLE  OF  PROFIT  ON  EXCHANGE, 
MADE  BY  INVESTOR 


Cost  of  169,458  francs  @  7^c $12,709.30 

Interest  @  6%  for  half  year 381.27 


Total  cost $13,090.57 

Sale  of  169,458  francs  @  lOc 16,945.80 


Net  profit  on  principal,  in  6  months.     $3,855.23 

Profit  on  outlay 30% 

Profit  per  cent,  per  annum 60% 


A  rise  of  exchange  to  15c  per  franc  would 

yield  a  gross  profit  on  outlay  of 100% 

A  rise  to  the  par  rate  of  19.30c  would  give 

a  gross  profit  of 157% 


Difficulty  generally  arises  in  realising  the  profits  on 
exchange  credits,  because  they  have  to  be  sold  to 
bankers  who  are  dealers  in  exchange,  and  they  buy  at 
less  than  the  market  price.  It  is  not  easy  for  a  single 
investor  to  deal  in  bank  exchange. 


Example  of  Profit  Made  by  Purchasing  Foreign 
Bonds. — Instead  of  leaving  the  169,458  francs  to  his 
credit  in  the  bank  at  Paris,  the  investor  can  instruct 
the  French  bank  to  sell  the  bill  of  exchange  (due  in  6 
months)  and  to  us?  the  amount  realised  in  buying 
French  Government  Bonds  for  him.  These  are  now 
very  cheap,  being  quoted  (in  September,  1920)  around 
86  francs  per  100  franc  Bond  of  the  5%  Loan. 

[29] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

Allowing  for  brokerage,  etc.,  the  169,458  francs 
should  buy  1910  Bonds  of  100  francs  each,  making  a 
total  face  value  of  191,000  francs. 

The  interest  receivable  would  be  5%  or  9,550 
francs  per  annum,  free  of  tax,  equal  to  5^8%  on  the 
total  cost. 

The  market  price  of  these  Bonds  is  sure  to  rise,  as 
they  are  the  highest  class  of  security,  and  in  peace 
times  such  bonds  can  only  be  bought  at  a  price  to 
yield  3%  interest  on  cost. 

By  holding  them  for  1  year,  the  market  price  should 
be  par,  100  francs,  and  French  exchange  should  be 
at  least  11  HC  per  franc.  By  holding  them  for  2  years, 
the  bonds  should  be  worth  110  francs  each,  and  ex- 
change will  probably  be  15c  or  more  per  franc. 

At  the  end  of  3  years  the  bonds  should  be  worth 
125  francs  each,  and  exchange  should  be  at  par, 
19.3  cents  to  the  dollar. 

The  investment  should  yield  profits  as  follows: 

EXAMPLE  OF  PROFIT  ON  PURCHASE 
OF  FOREIGN  BONDS 

Investment  of  $12,200  by  purchase  0/1910  Bonds 
of  5%  French  Loan,  at  86  frs.  per  100  fr.  Bond; 
exchange  at  7J/£  cents  per  franc. 
Investment  for  1  Year: 

Selling  price,  gross,  1910  Bonds  @ 
100  frs.— 191,000  frs.  exchanged 
@  llj/£c  per  franc $21,965.00 

Cost  of  Bonds,  as  above 12,200.00 


Gross  Profit  on  Principal  (80%) . . .     $9,765.00 
[301 


EXCHANGE  AND  FOREIGN  BONDS 

Investment  for  2  Years: 

Selling  price,  gross,  1910  Bonds  @ 
110  frs.— 210,100  frs.  exchanged 
@15c  per  franc $31,515.00 

Cost  of  Bonds 12,200.00 


Gross  Profit  on  Principal  (158%). .  $19,315.00 
Investment  for  3  Years: 

Selling  price,  gross,  1910  Bonds  @ 
125  frs.— 238,750  frs.  exchanged 
at  par,  19.30c  per  franc $46,078.75 

Cost  of  Bonds..  12,200.00 


Gross  Profit  on  Principal  (277%). .  $33,878.75 

Brokerage,  commission  and  stamps,  etc.,  for 
selling  the  Bonds,  should  not  exceed  one-fourth 
of  one  per  cent. 

METHOD  OF  BUYING  FOREIGN  BONDS 
IN  U.  S. 

The  procedure  is  simple.  The  American  dealer 
quotes  a  fixed  price  in  dollars,  based  on  the  present 
low  rates  of  exchange.  The  bond  is  delivered  to  the 
buyer  against  payment.  The  rises  or  falls  of  exchange 
can  be  watched  by  the  ilaily  newspaper  reports. 

As  exchange  rises  the  bond  becomes  worth  more.  It 
can  be  sold  through  a  dealer  for  cash  at  any  time. 
There  are  no  documents  to  be  signed  and  no  transfer 
forms  are  required;  possession  of  the  bond  gives 

ownership. 

[311 


HOW  TO  MAKE  MONEY   IN   FOREIGN 


THE  PRESENT  FINANCIAL  AND 
INDUSTRIAL  POSITIONS 

OF  THE  CHIEF 
FOREIGN  NATIONS 

FRANCE— WEALTH  AND  RESOURCES 

FRANCE  possesses  one  of  the  best  climates  in  the 
world,  with  a  fertile  soil,  inhabited  by  an  in- 
dustrious and  saving  population. 

General  Distribution  of  Wealth.— In  1914  the 
French,  as  a  people,  were  the  wealthiest  nation  in  the 
world.  There  were  not  so  many  large  individual 
fortunes  as  in  the  U.  S.  but,  in  proportion  to  popu- 
lation, there  was  a  larger  number  of  families  possessing 
considerable  funds  accumulated  by  saving. 

Usual  Investments. — The  funds  accumulated  by 
families  in  this  way  are  generally  invested  in  industrial 
or  government  securities,  the  rates  of  interest  allowed 
by  French  bankers  for  deposits  being  usually  very 
low;  in  times  of  cheap  money  only  1%  per  annum  is 
paid.  The  favorite  investments  are  French  Govern- 
ment Loans,  French  Industrial  stocks  and  bonds, 
South  African  Mines,  International  Oil  stocks, 
American  railroad  bonds,  Copper  stocks,  and  Lottery 
bonds.  Before  the  war,  Russian  Government  bonds 
and  industrial  stocks  were  also  largely  bought. 

Paris  as  an  Industrial  Centre. — The  City  of 
Paris  is  a  huge  workshop;  its  character,  as  regards 
the  center  of  the  City,  is  disguised  by  the  architecture 

(32J 


EXCHANGE  AND  FOREIGN  BONDS 

of  its  buildings,  which  are  compelled  to  conform  to 
certain  artistic  standards. 

Behind  the  showy  fronts,  however,  earnest  work  is 
being  done  and  hands  and  brains  are  busy  during 
longer  hours  than  are  worked  in  the  United  States. 

To  the  north  of  the  city,  where  tourists  seldom  go, 
are  large  factories  and  workshops. 

Methods  of  Working. — The  French  workman 
works  longer  hours  than  the  American,  and,  although 
his  methods  may  appear  careless,  he  gets  good  results. 
He  does  not  take  kindly  to  uninteresting  work  or 
quantity  production,  but  prefers  work  on  which  he 
can  use  his  natural  inventive  skill.  He  may  smoke 
cigarettes  and  empty  a  bottle  of  wine  during  his 
working  hours,  and  do  other  things  which  would 
shock  the  efficiency  expert,  but  his  day's  output  will 
compare  favorably  as  to  quality  and  quantity  with 
that  of  the  workmen  of  other  nations.  Like  the 
American  workman,  he  can  be  trusted  to  use  his 
brains  in  carrying  out  his  work. 

Increase  in  Manufacturing  Power. — The  war, 
and  American  co-operation  with  the  French  factories, 
has  brought  automatic  and  complicated  machinery 
into  general  use,  with  the  effect  of  very  considerably 
increasing  the  output  per  man,  and  yielding  higher 
wages. 

American  Goods  in  Demand. — France  is  largely 
self-supporting  as  regards  food,  owing  to  its  excellent 
climate,  but  it  needs  American  cotton,  tools,  machin- 
ery, electrical  supplies,  and  other  manufactured 
articles  in  considerable  quantities,  quality  and 
efficiency  being  more  considered  than  low  prices. 

[33] 


HOW  TO  MAKE   MONEY   IN   FOREIGN 

French  Credit. — The  standard  of  business  honesty 
in  France  is  high,  engagements  are  generally  scrupu- 
lously respected,  while  foreigners  are  treated  fairly, 
both  by  business  men  and  by  the  French  laws. 

Business  is  carried  on  in  a  dignified  way  and  with 
proper  courtesy,  but  the  bargaining  is  keen. 

Special  Artistic  Capacity. — In  addition  to  in- 
ventive skill,  the  French  have  the  gift  of  making  things 
of  beauty,  a  gift  which  is  fostered  by  careful  training 
and  by  the  natural  beauty  of  their  country,  as  v/ell  as 
by  the  labors  of  generations  in  filling  their  towns  and 
cities  with  objects  of  art  as  well  as  of  utility.  The 
Frenchman  sees  no  reason  why  an  article  of  use  should 
not  be  also  pleasing  in  appearance  and  he  is  right. 

Its  Yield  of  Wealth.— The  facility  of  production 
of  beautiful  objects  brings  enormous  wealth  to  France. 

Iron  and  Coal  Supplies. — As  regards  materials 
for  manufacturing,  France  has  now  recovered  her 
provinces  of  Alsace  and  Lorraine,  with  their  rich 
deposits  of  coal,  iron,  and  potash,  and  the  enormous 
woolen  and  cotton  manufacturing  plants  situated 
there.  She  is  also  entitled  to  receive  from  Germany 
an  indemnity  which  in  amount  is  more  than  sufficient 
to  pay  all  her  foreign  war  indebtedness.  She  could 
pay  this  off  and  have  a  good  surplus  by  realising  her 
own  investments  abroad,  but  this  would  be  foolish. 

Repairing  of  War  Damages. — During  the  last  18 
months  she  has  so  far  repaired  the  damage  done  in 
Northern  France  as  to  allow  of  the  general  resumption 
of  agricultural  and  industrial  work. 

New  Machinery  and  Plants  Installed. — New 
machine  plants,  installed  in  the  most  efficient  type  of 

[341 


EXCHANGE  AND  FOREIGN  BONDS 

factories  and  works,  have  already  replaced  those 
destroyed  during  the  war. 

Wireless  Plant. — At  Bordeaux,  the  American  army 
worked  miracles  in  providing  new  shipping  facilities 
and  storage  warehouses,  and  installed  one  of  the  most 
powerful  wireless  stations  in  the  world. 

Hydro-electric  Power. — French  engineers  have 
been  busy  developing  hydro-electric  power  from  the 
abundant  water  power  available  in  the  center  and 
south  of  France.  Over  24  million  dollars  has  been 
spent  on  this  during  the  war,  making  over  60  million 
dollars  now  invested  in  these  undertakings. 

Wealth  from  Colonies. — The  colonies  of  France 
are  also  being  more  rapidly  developed  as  providers  of 
agricultural  and  mineral  raw  materials  for  French 
manufactures.  Her  colonies  are  22  times  the  area  of 
France  and  they  export  to  France  48%  of  their  pro- 
duction, while  they  buy  from  her  over  55%  of  their 
imports. 

Algeria,  Tunis  and  Morocco,  which  are  near  hand, 
produce  large  quantities  of  wheat,  fruits  and  cattle, 
and  have  considerable  areas  of  deposits  of  iron,  zinc 
and  lead.  Petroleum  has  also  been  found,  but  has  not 
yet  been  exploited. 

French  Assets  and  Liabilities. — The  wealth  of 
France  is  estimated  to  be  100  Billions  of  dollars;  her 
debts  to  foreigners  are  six  Billions  and  her  total 
national  debts  only  35  Billions. 

Her  own  investments  in  foreign  countries  are  over 
eight  billion  dollars,  more  than  sufficient  to  pay  what 
she  owes  to  the  U.  S.,  and  every  other  foreign 
creditor. 

135] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

Extension  of  French  Commerce:  Important 
New  Enterprises. — Besides  restoring  her  own  in- 
dustries on  a  larger  scale  than  before,  France  is  de- 
veloping new  enterprises,  including  railways  and 
steamship  lines,  to  bring  the  West  Coast  of  Africa  and 
all  South  America  considerably  nearer  as  markets. 
One  scheme,  which  is  destined  to  have  an  important 
effect  on  both  European  and  American  trade,  is  the 
construction  of  new  railway  lines  along  the  Atlantic 
Coasts  of  Portugal  and  of  Spain,  and  through  Morocco 
to  Dakar  on  the  West  African  coast.  From  there  the  sea 
j  ourney  to  the  Brazilian  Coast  can  be  made  within  3  days. 

Another  project  is  the  flooding  of  a  part  of  the 
deserts  lying  between  Tunis  and  Algeria  and  the 
French  West  African  colonies.  Portions  of  these 
deserts  are  below  sea  level,  and  great  inland  lakes 
probably  existed  there  ages  ago.  The  reflooding  of 
these  would  allow  of  the  cultivation  of  huge  areas  of 
land  which  are  now  useless.  The  water  communi- 
cation thus  provided  would  make  the  transport  of 
early  crops  easy  and  cheap. 

BONDS  OF  FRENCH  CITIES 

THE  SECURITY  FOR  THEIR  REPAYMENT 


Bonds  issued  by  the  four  chief  French  cities,  Paris 
Lyons,  Marseilles  and  Bordeaux,  are  favorite  invest- 
ments in  France. 

All  of  these  cities  are  important  centers  of  trade, 
their  finances  are  well  managed,  and  their  credit  is  of 
the  highest  class,  as  is  shown  by  the  fact  that  their 
bonds  have  usually  been  issued  at  3J/£%  interest. 

[361 


EXCHANGE  AND  FOREIGN  BONDS 

Restriction  of  Borrowings  by  French  Cities. — 

No  town  is  allowed  to  raise  loans,  by  the  issue  of 
bonds,  without  the  consent  of  the  French  govern- 
ment. The  details  of  municipal  finance  are  checked 
by  a  special  government  department  and,  before  any 
loan  may  be  raised,  the  authorities  of  the  town  must 
satisfy  this  department  that  the  expenditure  is  neces- 
sary, that  it  will  be  remunerative,  and  that  the  munic- 
ipal revenues  are  sufficient  to  provide  for  the  annual 
payments  of  interest  and  for  the  repayment  of  the 
loan  within  the  period  proposed. 

Municipal  Income. — Most  French  towns  own 
land  from  which  they  receive  rents  and  they  share  in 
the  receipts  of  the  public  utility  companies  to  which 
franchises  are  granted  for  supplies  of  gas,  electric 
light  and  power,  street  railways  and  other  enter- 
prises. Municipal  taxes  are  levied  on  real  and  per- 
sonal estates,  and  on  persons  and  firms  carrying  on 
trades  and  professions. 

Both  the  State  and  the  municipal  taxes  on  real  and 
personal  estate  are  collected  by  the  National  Govern- 
ment ;  its  proper  share  is  paid  over  to  the  municipality. 

Many  of  the  French  towns  levy  duties  on  goods 
brought  into  the  town;  these  are  called  "octroi" 
duties,  and  are  charged  on  most  articles  of  food,  build- 
ing materials,  coal,  gasolene,  oil,  etc.  They  yield  a 
very  large  proportion  of  the  total  municipal  revenue. 

PARIS 

Paris  has  already  been  described  in  this  book;  it  is 
one  of  the  richest  cities  in  the  world  and  one  of  the 
great  financial  centers  of  Europe. 

[37] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

LYONS 

Lyons  is  a  natural  trade  center,  being  the  meeting 
point  of  the  traffic  to  and  from  France,  Switzerland 
and  Southern  Europe ;  it  has  been  an  important  com- 
mercial town  for  the  last  1800  years  or  more.  It  lies 
about  %  of  the  distance  between  Paris  and  Marseilles, 
and  has  a  population  of  about  650,000 ;  the  total  debt 
of  the  city  is  $33,000,000;  roughly  $50  per  head. 

The  chief  industries  are  the  spinning,  weaving,  dye- 
ing and  finishing  of  silk  fabrics;  steel  making,  engin- 
eering, locomotive  building,  automobile  and  chemical 
works. 

The  Rhone  and  Saone  rivers  run  through  the  town. 
The  current  of  the  Rhone,  in  its  passage  through 
Lyons,  is  rapid  and  the  flow  is  sufficient  to  furnish  all 
the  electricity  required  for  the  motive  power,  heating 
and  lighting  of  the  whole  Lyons  district.  Plans  are 
already  made  for  making  greater  use  of  this  power. 

The  revenues  of  Lyons  in  1918  amounted  to  over  28 
million  francs. 

MARSEILLES 

This  town  is  a  center  for  Mediterranean  and  African 
trade  and  has  been  so  ever  since  commerce  was  begun 
in  the  earliest  ages  of  civilization. 

It  is  the  most  important  port  on  the  Mediterranean, 
which  is  a  sea  having  no  tides,  the  water  level  for  all 
its  coast  line  being  practically  the  same,  every  hour 
of  the  day  and  at  all  seasons. 

The  opening  of  the  Suez  Canal  materially  increased 
the  trade  of  Marseilles  with  the  Far  East,  India, 
South  Africa  and  Australia.  It  is  the  chief  port  also 

38] 


EXCHANGE  AND  FOREIGN  BONDS 

for  the  North  and  South  American  and  the  African 
trade  of  France,  Switzerland  and  Italy,  as  well  as  for 
the  French  trade  with  other  foreign  ports  on  the 
Mediterranean. 

The  shipping  facilities  are  sufficient  to  accommodate 
2,000  vessels  at  any  time,  and  further  improvements 
and  extensions  are  already  in  hand. 

The  Rhone  river  runs  into  the  Mediterranean  at 
Marseilles,  through  a  wide  and  broken  up  channel. 
It  is  intended  to  canalize  this  river  for  a  distance  of 
over  200  miles  inland.  This  scheme  will  reclaim  over 
half  a  million  acres  of  swamp  land  near  Marseilles,  now 
forming  part  of  the  mouth  of  the  river. 

The  city  is  a  center  of  large  industries,  including  the 
manufacture  of  soap  and  vegetable  oil  products, 
sugar  refining,  shipbuilding,  etc.  It  also  contains 
extensive  factories  for  making  tobacco,  cigars,  matches 
and  gunpowder,  the  manufacture  and  sale  of  which 
are  government  monopolies  in  France,  yielding  large 
profits. 

The  population  of  Marseilles  is  over  750,000;  the 
municipal  income  two  years  ago  was  over  45  million 
francs,  and  the  real  estate  owned  by  the  city  itself 
was  valued  at  nearly  20  million  francs.  The  total 
municipal  debt  is  225  million  francs,  equal  to  45 
million  dollars,  or  $60  per  head. 

BORDEAUX 

This  city  is  an  inland  port,  on  the  Garonne  river, 
opening  into  the  Atlantic.  It  was  the  chief  debarka- 
tion center  for  American  troops  and  supplies  during 
the  war,  and  the  U.  S.  armies  enriched  the  town  by 

[39] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

creating  extensive  new  docks  and  warehouses,  and 
by  erecting  the  largest  wireless  station  in  the  world, 
which  has  now  been  sold  to  the  French  Government. 

The  town  is  one  of  the  great  ports  of  Europe,  al- 
though situated  60  miles  from  the  Atlantic.  It  is  the 
outlet  for  the  trade  and  manufactures  of  the  central 
and  south  western  districts  of  France.  Over  20 
million  dollars  had  been  spent  before  the  war  in 
building  the  harbor  and  providing  it  with  modern 
facilities.  The  additions  made  by  the  U.  S.  army  now 
enable  it  to  berth  over  1,000  vessels  at  any  time. 

Bordeaux  is  the  chief  port  for  the  French  trade  with 
Brazil,  Argentina,  and  the  French  West  African 
colonies.  It  is  also  the  center  of  the  Bordeaux  wine 
district  and  much  of  this  production  is  exported. 

There  is  a  considerable  shipbuilding  trade,  the  river 
Garonne  being  navigable  for  large  vessels  all  through 
the  year,  and  there  are  important  engineering,  automo- 
bile, woodworking,  tanning,  sugar  refining,  paper  and 
chemical  works  in  the  district. 

The  population  is  over  300,000,  the  municipal  debt 
is  116  million  francs;  roughly  $77  per  head;  the  annual 
municipal  income  is  over  20  million  francs. 


For  the  present  market  prices  of  French  Municipal 
Bonds,  and  the  profits  obtainable  by  their  purchase, 
see  the  section  "What  to  Buy", 


POINTERS— FRANCE 

France,  has  sufficient  gold  on  hand  to  more  than 
pay,  five  times  over,  the  amount  of  her  share  of  the 

[40] 


EXCHANGE  AND  FOREIGN  BONDS 

Anglo-French  loan  due  for  payment  in  New  York 
this  Fall. 


France  is  raising  nearly  double  the  amount  in  taxes 
this  year,  as  compared  with  1919,  the  rate  per  head 
having  been  increased  from  $57  to  $99,  at  the  valu- 
ation of  normal  exchange. 


The  trade  balance  of  the  United  States  against 
France  was  decreased  by  16%  in  the  first  3  months 
of  1920. 


Of  the  French  5%  Government  Loan  of  March, 
1920,  purchaseable  at  approximately  $75  per  1,000 
francs  in  New  York  (value  at  normal  exchange 
$193),  over  25,000  small  American  investors  bought 
bonds  of  1,000  francs  each. 


During  the  6  months  from  August  1, 1920,  Germany 
is  to  deliver  to  the  Allies  (chiefly  for  use  by  French 
works  and  factories),  two  million  tons  of  coal  per 
month,  the  value  of  this  to  be  credited  to  Germany. 


Britain  is  lending  25  million  dollars  cash  to  Germany 
to  provide  wages  for  the  miners  producing  this  coal. 


From  November,  1918,  up  to  June  29,  1920,  work 
done  in  France  by  the  reconstruction  of  ruined  towns 
and  farm  land  was  as  follows: 

Out  of  9  million  acres  of  farm  land,  7  million  acres 
had  been  cleared  of  explosives,  nearly  6  million  of 

[41] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

this  had  also  been  cleared  of  barbed  wire,  and  over 
4  million  acres  of  it  is  already  bearing  crops. 

Of  277,000  houses  partly  destroyed,  185,000  have 
been  repaired;  28,500  barracks  and  44,000  temporary 
houses  have  also  been  built  to  replace  297,000  houses 
entirely  destroyed.  Over  60,000  shells  fell  in  the  town 
of  Armentieres,  and  the  whole  town  had  to  be  rebuilt 
from  the  foundations  up. 

Of  the  3,500  factories  destroyed  in  France,  2,600 
have  been  repaired,  and  they  are  now  employing 
over  300,000  workmen. 

Over  two  billion  dollars  has  been  spent  by  the 
French  Government  on  this  reconstruction  work, 
for  which  Germany  will  have  to  pay. 


DESCRIPTION  OF  FRENCH  GOVERNMENT 
BONDS 

Government  Bonds  are  called  "Rentes";  when 
they  are  redeemable  they  are  called  "Rentes  Amorti- 
ssables." 

They  are  issued  in  two  forms,  Registered  bonds 
(certificats  nominatives),  and  Bearer  Certificates 
(certificats  au  porteur).  The  bearer  certificates  have 
coupons  attached  for  interest  payments  during  5 
years. 

These  coupons  can  be  cashed  through  American 
bankers  and  brokers,  and  the  bonds  themselves  are 
accepted  freely  in  the  U.  S.  as  collateral  for  bank  loans. 

In  the  case  of  loss  of  bearer  certificates,  they  will 
not  be  replaced  by  the  French  Government,  so  they 
should  be  kept  safely. 

[42] 


EXCHANGE  AND  FOREIGN  BONDS 

The  5%  Government  Bonds  are  free  from  French 
stamp  duty  or  taxes,  and  there  is  no  charge  for  re- 
newing the  interest  coupons. 

The  appearance  of  French  Government  Bonds  is 
rather  strange  to  American  eyes.  A  1,000  franc  5% 
certificate  would  bear  on  its  face  the  amount  of  "frs. 
50."  This  means  that  the  annual  interest  payable  to 
the  holder  is  50  francs,  which  is  5%  on  1,000  francs. 
From  the  French  point  of  view,  the  buyer  purchases 
the  right  to  receive  an  annual  interest  of  50  francs, 
together  with  the  right  to  sell  that  income  at  the 
market  price,  or  to  be  finally  repaid  the  face  value  of 
the  bond,  1,000  francs,  by  the  French  Government. 
This  is  different  to  the  ordinary  understanding  that 
the  purchaser  buys  a  capital  value  of  1,000  frs.  For 
Government  bonds,  which  are  issued  for  long  periods, 
the  amount  of  the  yearly  interest  receivable  is  the 
most  important  item. 

TERMS  USED  FOR  FRENCH  GOVERNMENT 
BONDS 

La   Rente   3%    Perpetuelle— The   3%  Irredeemable 

Loan. 
La  Rente  3%  Amortissable— The  3%  Redeemable 

Loan. 

Les  Rentes  Franchises — French  Government  Bonds. 
Une  Coupure  de  5  de  Rente — A  Bond  giving  the  right 

to  receive  interest  of  5  francs  per  annum. 
Une  Coupure  de  30  de  la  Rente  5%  Amortissable — 

A  Bond  of  30  francs  interest  per  annum,  of  the  5% 

redeemable  loan,  principal  600  frs. 

[43] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

The  capital  value  is  calculated  thus:  a  5%  Bond  of 
100  frs.  yield  interest  of  5  frs.  per  annum;  then,  a 
5%  Bond  of  600  frs.  yields  interest  of  30  frs.  per 
annum. 


See  the  section  "What  to  buy,"  for  present  prices 
of  French  Government  bonds  and  profits  obtainable. 


[44] 


EXCHANGE  AND  FOREIGN  BONDS 


BELGIUM— WEALTH  AND  RESOURCES 

French  is  the  business  language  of  Belgium,  but 
the  people  are  of  two  races,  Walloons  and  Flamands, 
speaking  separate  languages  which  are  kept  alive  by 
newpapers  and  books  published  in  their  own  districts. 

Agriculture. — On  the  western  side  (the  Antwerp, 
Brussels  and  Ostend  districts);  the  country  is  almost 
as  flat  as  a  billiard  table,  and  is  intensively  culti- 
vated, much  of  it  by  manual  labor.  About  three- 
fifths  of  the  whole  area  of  Belgium  is  under  culti- 
vation, and  it  produces  crops  of  the  average  value  of 
$100  per  acre,  the  highest  yield  in  the  world.  The 
land  area  damaged  by  the  Germans  was  less  than  1% 
of  the  total  area  of  Belgium.  Last  year,  1919,  the 
agricultural  production  was  higher  than  the  average 
before  the  war. 

Coal. — The  extensive  coal  mines  of  Mons  are  to 
the  south,  near  the  French  frontier.  Soft  coal,  in 
which  Belgium  was  formerly  lacking,  has  been  found 
recently  in  large  quantities  in  Limburg,  and  these 
deposits  are  now  being  developed,  so  as  to  make  the 
importation  of  bituminous  or  long  flame  coal  unneces- 
sary for  the  future.  The  output  of  coal  is  already 
more  than  the  average  pre-war  production. 

Iron  and  Steel. — Belgian  iron  and  steel  are  of 
excellent  quality;  the  output  of  steel  increased  over 
150%  during  the  10  years  before  the  war. 

Zinc  was  also  treated  to  the  extent  of  one-fifth  of 
the  world's  production,  chiefly  for  export. 

[45] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

Plant  and  Machinery.— During  their  occupancy 
of  the  country,  the  Germans  spared  the  coal  mines,  as 
they  needed  the  production,  but  they  tried  to  prevent 
the  future  competition  of  Belgium  in  iron,  steel  and 
zinc  by  deliberately  wrecking  the  blast  furnaces  and 
works  and  removing  to  Germany  such  machinery  as 
they  did  not  destroy. 

The  Treaty  of  Peace  provided  that  the  stolen 
machinery  should  be  returned,  and  more  than  half  of 
it  has  been  recovered.  The  rest  of  it  is  being  rapidly 
replaced  with  improved  machinery. 

In  destroying  a  competitor's  machinery  and  plants, 
the  Germans  were  shortsighted;  the  result  has  been 
that  the  Belgians  are  installing  new  and  better  plants 
which  will  make  their  competition  still  more  effective. 

Raw  Material. — The  production  of  the  Australian 
zinc  ore  mines  was  formerly  controlled  by  Germany, 
but  the  Australian  government  has  now  taken  control, 
and  the  production  is  reserved  for  the  allied  nations, 
including  the  U.  S. — Belgium  has  been  allotted  over 
240,000  tons  of  this  ore  for  her  industries.  At  the 
same  time,  the  Canadian  zinc  mines  were  also  freed 
from  German  control,  and  much  of  their  production  is 
being  treated  in  the  United  States. 

At  present  the  production  of  Belgian  zinc  is  about 
70%  of  the  pre-war  average. 

Textiles. — The  extensive  Belgian  cotton,  woolen, 
and  linen  spinning  and  weaving  factories  were  kept 
at  work  during  the  German  occupation,  their  produc- 
tion being  sent  into  Germany ;  there  are  now  in  opera- 
tion 1,400,000  cotton  spindles,  being  87%  of  the  pre- 
war total.  The  woolen  mills  are  being  worked  to  their 

[46 


EXCHANGE  AND  FOREIGN  BONDS 

full  capacity,  but  out  of  330,000  flax  spindles,  which 
are  almost  all  fit  for  work,  only  one-third  are  in  use 
owing  to  the  failure  to  receive  supplies  from  Russia, 
which  formerly  furnished  a  large  proportion  of  the 
raw  material  for  the  Belgian  mills. 

Glass. — Belgium  usually  exported  about  90%  of 
her  production  of  plate  and  window  glass;  at  present 
the  plants  are  working  to  60%  of  their  capacity; 
as  the  supplies  of  raw  material  are  increased,  produc- 
tion will  increase  in  proportion. 

Railroads. — The  Belgian  railway  lines  are  owned 
and  worked  by  the  government,  at  a  profit. 

The  Germans  destroyed  over  1,300  miles  of  track 
and  over  1,400  bridges,  and  they  sent  into  Germany 
all  the  engines,  cars  and  railway  materials  which  were 
not  actually  used  by  them  for  war  purposes.  On  the 
other  hand,  the  Germans  built  several  new  lines  and 
doubled  the  tracks  of  existing  lines,  for  military  use. 
Much  of  the  stolen  material  and  rolling  stock  has  been 
recovered,  and  the  freight  traffic  is  now  about  80% 
of  the  pre-war  average. 

Ports. — Antwerp  is  the  shipping  port  for  the  im- 
port of  raw  materials  and  the  export  of  manufactured 
goods  for  the  densely  inhabited  manufacturing  dis- 
tricts of  all  Belgium,  North  and  East  France,  South 
Germany,  Luxembourg,  Switzerland  and  the  adjoin- 
ing portions  of  Austria  and  Italy.  The  commerce  of 
Antwerp  is  fed  by  an  extensive  system  of  canals  and 
by  an  economical  and  efficient  railway  service,  with 
low  through  traffic  rates  granted  to  adjoining  nations. 

The  shipping  traffic  of  the  port  is  next  in  importance 
to  that  of  Hamburg,  being  over  14  million  tons  per 

f47l 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

annum.  The  recent  proposed  additions  to  the  port 
would  more  than  double  its  capacity. 

Ghent,  (Gand,  or  Te  Gent)  which  is  the  Belgian 
cotton  spinning  centre,  is  also  an  important  inland 
port;  its  cotton  production  is  already  higher  than 
before  the  war. 

Bruges  has  direct  communication  with  the  sea  by  a 
ship  canal,  with  an  outlet  at  Zeebrugge  (Bruges  on 
the  Sea.) 

Colonies. — The  chief  colony  of  Belgium  is  the 
Belgian  Congo,  which  is  about  one-third  the  size  of 
the  United  States.  The  most  valuable  part  of  this 
colony  was  held  as  the  private  property  of  the  late 
King  Leopold,  and  the  inhuman  treatment  of  the 
natives  by  his  agents  and  troops  was  the  cause  of 
many  serious  and  heated  protests  by  foreign  govern- 
ments, both  to  the  Belgian  government,  which 
stated  its  inability  to  control  the  King,  and  to  King 
Leopold  himself,  who  squandered  on  vicious  pleasure 
the  vast  wealth  obtained  from  this  private  domain. 

After  his  death  all  of  the  Congo  was  placed  under 
the  control  of  the  State;  the  new  King  relinquishing 
his  rights  to  the  territory.  The  treatment  of  the 
natives  has  been  greatly  improved,  and  Belgium  has 
now  received  a  mandate  to  govern  the  adjoining 
portion  of  a  former  German  colony. 

The  Congo  is  one  of  the  largest  storehouses  of  the 
world  for  deposits  of  gold,  diamonds,  copper,  tin,  iron 
and  coal.  Cotton  can  also  be  grown,  of  excellent 
quality.  Wild  rubber,  palm  kernels  and  oil,  ivory  and 
copper,  are  amongst  the  principal  exports.  In  1919 
gold  was  exported  to  the  value  of  18  million  dollars, 

[48] 


EXCHANGE  AND  FOREIGN  BONDS 

and  diamonds  valued  at  20  million  dollars,  in  addition 
to  over  40,000  tons  of  palm  oil,  and  23,000  tons  of 
copper  ore. 

More  than  1,300  miles  of  railway  track  is  being 
operated,  and  9,400  miles  of  rivers  are  open  to  cargo 
carrying  steamers. 

American  Trade  Openings. — The  development 
of  the  Congo  offers  unlimited  opportunities  to  Amer- 
ican railroad,  engineering,  and  mining  industries,  but 
capital  is  needed. 

The  investment  of  American  funds  in  Belgium,  to 
develop  her  colonies,  would  help  the  United  States 
even  more  than  it  would  help  Belgium.  If  America 
does  not  take  advantage  of  this  opportunity  other 
nations  certainly  will. 

Belgian  Trade. — The  population  of  all  Belgium  is 
less  than  that  of  greater  New  York.  The  people  are 
hard  working  and  economical,  by  necessity.  Their 
traders  and  bankers  are  enterprising,  shrewd,  and 
painstaking  in  seeking  and  developing  foreign  markets, 
but  their  opportunities  at  present  are  greater  than 
their  means. 

Their  knowledge  of  the  physical  geography,  and  the 
undeveloped  resources,  of  foreign  lands  is  far  in  ad- 
vance of  that  of  any  other  continental  nation.  Knowl- 
edge in  this  case  brings  them  considerable  wealth. 

Safety  of  Investments. — The  independence  of 
Belgium  is  guaranteed  by  Britain  and  France.  That 
this  is  treated  by  them  as  a  solemn  engagement  was 
proved  by  the  fact  that  the  entry  of  the  German  army 
into  Belgium  was  the  immediate  cause  of  the  British 
declaration  of  war,  for  that  stated  reason. 

[49] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

Investments  in  Belgian  securities  are  therefore  safe- 
guarded by  the  full  military  and  naval  powers  of 
Britain  and  France. 

Why  Belgian  Exchange  Is  Low. — The  reason  for 
the  present  low  exchange  value  of  the  Belgian  franc 
is  the  large  amount  now  owing  by  that  country  for 
purchases  of  machinery,  machine  tools,  and  raw 
materials  needed  to  equip  her  factories  and  to  enable 
them  to  produce  goods  for  export.  All  the  previous 
stocks  had  been  used,  destroyed,  or  taken  away  by 
the  Germans  during  their  occupation.  The  whole  of 
the  Belgian  industries  are  now  busily  engaged  in 
making  good  the  losses  incurred  through  the  war. 

Already  the  balance  of  trade  with  Holland,  France 
and  Germany  has  been  turned  in  favor  of  Belgium; 
she  now  only  owes  balances  to  those  nations  from 
whom  she  has  been  compelled  to  purchase  food  sup- 
plies and  raw  materials  for  manufactures,  most  of  it  at 
very  high  prices. 

In  the  year  1919  the  total  Belgian  exports  were  460 
million  dollars,  and  the  imports  1,000  million  dollars 
at  normal  exchange  values,  showing  an  excess  of  im- 
ports of  540  million  dollars,  being  chiefly  food,  raw 
materials,  machinery  and  manufacturing  supplies. 

Signs  of  Recovery. — For  the  two  months,  Jan- 
uary and  February  1920,  the  exports  were  200  million 
dollars,  and  the  imports  345  million  dollars,  showing 
that  the  raw  material  purchased  in  1919  was  being 
rapidly  turned  out  in  a  manufactured  state.  The 
other  months  of  this  year  will  probably  show  increas- 
ingly better^results. 

1501 


EXCHANGE  AND  FOREIGN   BONDS 

Incentive  to  Restoration  of  Normal  Exchange. 

— Belgium  lives  by  her  export  trade,  and  her  bankers, 
manufacturers  and  merchants  know  that,  in  order  to 
carry  this  on  profitably,  the  restoration  of  gold  pay- 
ments and  normal  exchange  rates  is  imperative.  All 
their  energy  is  being  directed  to  this  end  and,  at  the 
present  rate  of  progress,  exchange  should  be  restored 
to  its  former  standard  rate  within  the  next  two  years. 

In  September,  1920,  her  exchange  rate  was  already 
higher  than  that  of  France. 

Population  and  Area. — The  population  of  Bel- 
gium is  7,500,000,  contained  in  an  area  equal  to  that 
of  the  State  of  Vermont.  There  are  more  miles  of 
railway  in  Belgium  than  in  any  equal  area  of  the  world. 
These  railways,  owned  by  the  State,  have  always 
given  good  profits.  Their  value  is  about  %  that  of 
the  total  national  debt. 


In  the  Section  "What  to  Buy",  details  are  given 
of  the  present  market  prices  of  Belgian  Government 
Bonds  and  the  profits  to  be  made  by  their  purchase. 


POINTERS— BELGIUM 

Of  the  total  war  indemnities  to  be  paid  by  Germany, 
Austria  and  Bulgaria,  Belgium  is  to  receive  500 
million  dollars  in  gold,  before  payments  are  made  to 
any  of  the  other  allied  nations. 


Belgian  exchange  with  the  U.  S.  is  already  higher 
than  that  of  France,  because  the  Belgian  factories 
have  been  able  to  recommence  exporting  more  quickly. 

[51] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

Belgium  bought  largely  of  machinery  and  raw 
materials  during  1919,  her  total  imports  having  been 
1,000  million  dollars  and  exports  460  millions,  valued 
at  normal  exchange. 

In  the  first  two  months  of  1920  the  exports 
amounted  to  200  million  dollars,  or  nearly  half  the 
total  of  the  whole  year  1919. 


GREAT  BRITAIN— IS  SHE  SOLVENT? 

As  regards  the  honesty  of  the  government,  it  is 
sufficient  to  say  that  no  British  government  or  munici- 
pality or  colony  has  ever  defaulted  in  the  full  pay- 
ment of  its  loans  and  interest. 

Britain's  Burden. — From  the  very  commence- 
ment of  the  late  war,  Britain  has  had  to  finance  her 
allies;  even  France,  with  her  great  wealth,  had  to 
borrow  enormous  amounts  from  Britain,  which  was 
the  only  allied  nation  able  to  collect  quickly  the  great 
sums  needed. 

The  total  debt  owing  by  Britain  to  foreign  holders 
of  Government  securities  is  under  $100  per  head  of 
the  population  of  the  British  Isles.  It  is  impossible 
for  Britain  at  present  to  collect  the  loans  made  to  her 
Allies  for  war  purposes,  so  she  is  steadily  increasing 
her  production  and  paying  off  what  she  owes  to  the 
U.  S.  and  to  other  creditor  nations,  in  order  to  pre- 
serve her  own  credit.  This  is  a  wise  policy,  because, 
by  allowing  payment  by  her  debtors  to  be  delayed,  a 
much  larger  sum  will  ultimately  be  received.  Britain 
has  also  to  carry  the  burden  of  financing  several  of 
the  young  nations  created  at  the  Peace  Conference, 

[52] 


EXCHANGE  AND  FOREIGN  BONDS 

and  she  is  carrying  the  weight  of  Mesopotamia  and 
Palestine.  All  this  puts  a  tremendous  strain  on  her 
resources. 

Payments  Already  Made :  Sources  of  Revenue. 
— Great  progress  has  been  made  in  repaying  British 
foreign  indebtedness  by  revenue  raised  from  heavy 
taxation  of  luxuries,  amusements,  trading  profits,  and 
the  incomes  of  individuals.  Production  has  also  been 
largely  increased  and  the  adoption  of  automatic 
machinery  and  new  processes,  joined  to  the  specialised 
training  of  workmen,  have  added  to  the  productive 
power  of  her  industries  at  least  50%. 

Exports  are  increasing  each  month,  while  imports  of 
all  foreign  articles,  except  raw  materials,  are  restricted 
by  heavy  duties,  and  by  complete  prohibition  as 
regards  many  articles  of  luxury. 

Forced  Reduction  of  Imports  from  U.  S. — Pur- 
chases from  America  are  further  restricted  by  the 
present  state  of  exchange,  which  acts  as  an  import 
duty  of  30%. 

Repayment  of  Indebtedness  to  U.  S. — The  chief 
aim  of  the  British  Government  is  to  repay  at  the  earl- 
iest possible  moment  the  amounts  owing  to  the 
American  Government  and  to  American  bankers. 
The  fact  that  the  British  government,  during  the  war, 
collected  from  its  citizens  and  bankers  almost  their 
entire  stocks  of  good  American  securities,  for  pay- 
ments to  be  made  to  the  U.  S.  A.,  replacing  them  by 
War  Loan  Certificates,  is  evidence  of  the  fairness  with 
which  this  question  has  been  handled. 

British  Bank  Deposits. — The  money  now  placed 
on  deposit  with  British  bankers  (loaned  at  interest 

[53] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

for  fixed  periods  by  their  British  customers) ,  is  more 
than  double  the  total  needed  to  repay  the  whole  of 
Britain's  indebtedness  to  the  U.  S.  This  proves  that 
the  nation  is  not  insolvent,  but  her  statesmen  are 
too  sane  to  make  a  levy  on  working  capital  for  pay- 
ment of  war  expenditure,  a  proceeding  which  some  of 
the  labor  leaders  recommended.  The  British  know 
this  would  be  killing  the  goose  that  lays  the  golden 
eggs. 

Industries  at  Work  Again. — Britain  has  settled 
down  to  steady  work  again,  trade  is  brisk,  and  wages 
are  high.  There  have  been  troubles  with  strikes  but 
these  have  been  dealt  with  satisfactorily,  and  the 
Trades  Unions  have  been  held  in  check.  A  recent 
strike  of  railway  workers  was  smashed  by  the  public, 
which  considered  the  demands  of  the  Trades  Union 
to  be  unreasonable. 

When  Will  the  War  Expenditure  Be  Paid  Off.— 
During  the  5  years,  1915  to  1919,  the  British  Govern- 
ment borrowed  two-thirds  of  the  huge  sums  it  needed 
for  war  and  other  purposes,  but  raised  the  other  one- 
third  by  heavy  taxation. 

On  March  31,  1919,  the  total  amount  owing  by  the 
Government  to  her  own  citizens  and  to  foreign  nations 
was  nearly  37  billion  dollars.  Of  this  total  only  6J^ 
billion  dollars  was  owing  to  foreign  lenders,  and  against 
this  there  was  due  to  Britain,  from  her  allies  and 
colonies,  over  8J/£  billion  dollars. 

The  British  Government  never  pays  off  all  its 
National  Debt;  it  fixes  a  limit  of  debt  which  may  be 
safely  capitalised,  as  representing  productive  assets, 
which  is  to  be  repaid  gradually  by  a  sinking  fund; 

[54] 


EXCHANGE  AND  FOREIGN  BONDS 

the  excess  over  this  safe  load,  representing  expenditure 
of  the  war,  has  been  arranged  to  be  repaid  from  taxa- 
tion and  national  revenues  within  the  next  five  years. 

Man  Power  of  U.  K. — The  population  of  the 
British  Isles  is  nearly  50,000,000,  which  is  only  a 
fraction  of  the  man  power  of  the  Empire,  each  of  its 
Colonies  being  also  fair  sized  nations,  growing  rapidly 
in  numbers  and  wealth.  These  nations,  Canada, 
Australia,  New  Zealand,  South  Africa,  etc.,  have  no 
responsibility  for  the  Mother  Country's  war  debts, 
but  they  have  volunteered  to  pay  the  cost  of  their  own 
war  expenditure  and  of  their  armies  sent  overseas. 

Increase  of  Territory. — Britain  has  acquired 
control  over  large  additional  territories  as  a  result  of 
the  war,  and  these  are  being  actively  developed. 

Why  British  Exchange  Will  Probably  be  the 
First  to  Recover. — The  record  of  results  achieved 
since  the  declaration  of  Peace  shows  that  Great  Britain 
will  probably  be  the  first  of  the  European  nations  to 
recover  her  former  industrial  and  financial  power, 
with,  as  a  natural  consequence,  .the  restoration  of  the 
pound  sterling  to  its  former  normal  exchange  rate  of 
$4.87,  through  resumption  of  gold  payments. 

None  of  her  territory  has  been  invaded,  nor  has  she 
suffered  from  the  deliberate  destruction  of  property 
by  the  Germans,  such  as  took  place  in  Belgium  and 
Northern  France.  The  losses  of  ships  caused  by  the 
German  submarines  have  been  almost  completely 
replaced  by  new  steamers  built  in  the  British  and 
Irish  shipbuilding  yards. 

The  wholesale  scrapping  of  manufacturing  plants 
and  their  replacement  with  new  factories,  equipped 

(55) 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

with  the  most  efficient  machinery  and  labor  saving 
devices,  added  to  the  general  adoption  of  improved 
methods  of  quantity  production,  have  very  largely 
increased  Britain's  manufacturing  power. 

She  has  been  fortunate  too,  in  the  possession  of  a 
clean  and  capable  government  which  has  been  assisted 
willingly,  in  the  restoration  of  peace  conditions,  by 
the  ablest  business  men  and  financiers  of  the  nation. 


Refer  to  section  "What  to  buy"  for  present  market 
prices  of  British  securities  and  the  profits  to  be  made 
by  their  purchase. 


POINTERS  —  BRITAIN 

U.  S.  exchange  with  Britain  is  now  at  the  rate  of 
$3.60  per  £1,  as  compared  with  $4.50  a  little  over  a 
year  ago;  the  American  investor  can  now  buy  British 
Bonds  from  New  York  at  25%  less  than  the  British 
price. 


It  cost  the  British  Government  nearly  4  billion 
dollars  to  keep  the  exchange  rate  in  New  York  at 
$4.87  to  the  pound  sterling,  in  the  early  part  of  the 
war.  Now  that  war  expenditure  has  ceased  and 
Britain  is  making  large  profits  on  her  exporting  and 
shipping  trade,  her  exchange  will  return  gradually  to 
$4.87  as  the  war  debts  are  paid  off,  without  govern- 
ment assistance. 


By  trade  custom  most  foreign  nations  use  London 
as  the  clearing  house  for  claiming  payment  of  their 

[56 


EXCHANGE  AND  FOREIGN  BONDS 

debts  against  other  countries.  As  a  consequence, 
the  amounts  due  to  the  U.  S.  from  other  countries  at 
present  appear  as  part  of  Britain's  indebtedness,  and 
this  is  one  of  the  causes  why  the  British  pound  is  at  a 
very  heavy  discount.  As  against  this,  a  general  im- 
provement in  the  trade  of  foreign  nations,  added  to  the 
repayments  of  British  war  indebtedness,  may  cause 
sudden  rises  in  British  exchange  rates  with  the  U.  S. 
In  the  Fall  season,  Europe  buys  heavily  of  American 
foodstuffs,  and  all  European  exchange  rates  drop  for 
this  reason,  but  recover  towards  the  end  of  the  year. 

The  British  Board  of  Trade  has  just  published  an 
official  estimate  of  total  British  trade  for  the  year 
1920,  based  on  the  actual  figures  for  the  first  half  of 
the  year.  This  estimate  shows  an  excess  of  imports 
over  exports  of  2100  million  dollars. 

Against  this  deficit  must  be  placed  the  so-called 
"invisible  exports"  of  3,000  million  dollars,  consist- 
ing of  (1)  income  from  British  investments  abroad, 
(2)  earnings  of  British  ships,  and  (3)  other  paid 
services. 

The  surplus  of  900  million  dollars  will  be  available 
either  to  pay  off  indebtedness  to  foreign  creditors  or 
to  help  other  European  nations  to  recover  their  former 
prosperity. 

Either  method  will  ultimately  improve  the  British 
rate  of  exchange. 

The  war  cost  Britain  50  billion  dollars;  one-fifth 
of  this  has  already  been  paid,  one-fifth  at  least  will  be 
paid  during  1920,  one-fifth  more  will  be  paid  during 
the  next  five  years;  the  balance  will  probably  be 

[57] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

funded  and  repaid  by  a  long  sinking  fund,  as  it  will 
be  owing  to  her  own  people. 

Britain  owes  now  the  same  amount  of  war  debt, 
per  head  of  her  population,  as  she  did  at  the  end  of  the 
wars  with  the  first  Napoleon,  over  100  years  ago. 
She  cleared  off  that  debt  with  ease  then,  when  her 
productive  power  in  manufacturing,  and  her  wealth, 
were  not  a  tenth  of  what  they  are  at  present. 

The  British  loans  to  Russia,  France,  Belgium, 
Italy,  Serbia  and  other  allies  during  the  war,  amount 
to  9,253  million  dollars.  The  U.  S.  loans  to  the  same 
nations  were  5,295  million  dollars,  and  to  Britain 
4,270  million  dollars.  Britain  is  repaying  her  own 
borrowings  from  the  U.  S.  without  waiting  for  her 
debtors  to  repay. 

SALVATION  BY  THE  TRADE  ROUTE 

Extract  from  the  Sun  and  the  N.  Y.  Herald,  Aug.  27, 
1920,  reproduced  by  courteous  permission  of  the  Editor. 

"Misguided  patriots  who  proclaim  America's  in- 
alienable right  to  save  the  world  from  ruin  will  not, 
we  hope,  resent  some  plain  commercial  and  financial 
facts  indicating  that  this  same  downtrodden  world  is 
earnestly  and  successfully  working  out  its  own 
salvation. 

July  foreign  trade  of  the  United  States  included 
$654,000,000  exports,  not  far  above  the  low  record 
for  this  year.  But  our  imports  were  $537.000,000, 
exceeded  in  all  our  history  only  once,  and  that  in  the 
previous  month.  The  favorable  trade  balance  in 
July  was  only  $117,000,000,  the  lowest  it  has  been  at 
that  period  of  the  year  since  1914.  The  favorable 

[58] 


EXCHANGE  AND  FOREIGN  BONDS 

balance  in  July,  1919,  was  $225,000,000.  The  seven 
months'  favorable  balance  this  year  is  $1,420,000,000, 
compared  with  $2,663,092,000  for  the  same  period 
in  1919. 

If  this  drop  of  nearly  50  per  cent,  in  our  favorable 
balance,  both  for  the  seven  months  and  for  July,  most 
of  it  resulting  from  increased  imports  from  Europe, 
does  not  indicate  that  Europe  is  again  producing, 
getting  on  its  feet  commercially  and  working  out  its 
own  salvation,  cold  figures  mean  nothing. 

Still  stronger  proof  lies  in  the  report  of  British 
trade  for  July,  which  shows  $775,000,000  exports, 
against  $815,000,000  imports,  leaving  a  debit  balance 
of  only  $40,000,000.  Great  Britain's  invisible  revenue 
from  ships,  insurance  and  foreign  investments  is  more 
than  $250,000,000  a  month,  according  to  the  British 
Board  of  Trade.  This  invisible  revenue  pays  the  trade 
deficit  for  July  and  leaves  a  good  margin  besides. 

Sterling  exchange  has  fallen  to  the  low  figure  of 
$3.54,  a  considerable  discount  from  the  normal  $4.86. 
Sterling  is  low,  not  because  England  could  not  put  it 
at  par  in  New  York  but  because  Great  Britain,  un- 
hampered by  pink  tea  philosophy  about  saving 
Europe  for  democracy,  is  deep  in  the  business  of 
helping  Europe  to  save  itself. 

The  spare  cash  in  the  English  till  is  not  being  used 
to  put  the  pound  sterling  back  to  par  in  New  York. 
It  is  being  used  in  all  parts  of  the  world,  including  the 
United  States,  to  finance  purchases  and  sales  by 
France,  Belgium,  Italy,  Germany,  Austria,  Hungary, 
Rumania,  Czecho-Slovakia,  Jugo-Slavia  and  the 
Baltic  States.  These  markets  are  opened  on  privi- 

(59J 


HOW  TO   MAKE   MONEY   IN   FOREIGN 

leged  terms  to  the  British  merchant,  because  the 
British  banker  stands  behind  him  and  the  British 
Government  stands  behind  both  of  them.  What  the 
English  banker  lends  to  the  Continent  now,  he  will 
later  gather  in  at  a  huge  profit  in  appreciated  cur- 
rencies. What  he  borrows  in  New  York  he  will  pay 
back  with  fewer  pounds  when  he  gets  ready  to  put 
sterling  up  toward  par  again. 

This  is  a  practical,  hard  headed  way  of  saving  the 
world,  in  marked  contrast  to  the  idealistic  Sunday 
school  methods  persistently  advocated  in  certain 
quarters  on  this  side  of  the  water  during  the  last  two 
years." 

ADVICE  ON  INVESTMENTS  IN  BRITISH 
SECURITIES 

The  American  exchange  rates  are  exceptionally 
unfavorable  to  Britain  at  present  because,  like  her 
European  allies,  she  has  been  purchasing  large  quan- 
tities of  raw  materials,  for  installing  additional 
manufacturing  plants,  and  for  working  into  goods 
intended  for  export. 

Delay  in  Payment  for  Exports. — The  interval 
between  the  purchase  of  such  raw  materials,  and  their 
export  as  finished  manufactures,  extends  to  several 
months,  in  addition  to  which  a  credit  of  about  9 
months  has  to  be  given  to  the  foreign  purchaser. 

Further,  Britain  is  a  large  buyer  of  foodstuffs  from 
the  U.  S.,  more  than  50%  of  the  food  consumed  is 
imported. 

Probable  Movements  of  Exchange  Rates. — The 
steadily  increasing  exports,  and  the  restriction  of 

[60| 


EXCHANGE  AND   FOREIGN   BONDS 

imports  to  raw  materials  and  necessities,  will  inevit- 
ably cause  rapid  improvements  in  exchange  from  the 
end  of  1920  onwards.  It  is  not  likely  that  the  ex- 
change will  fall  to  any  extent  below  the  present  level, 
it  will  much  more  probably  improve  towards  the  end 
of  this  year.  The  pound  sterling  is  quoted  at  present 
around  $3.50  (as  compared  with  $4.50  over  a  year 
ago)  showing  an  advantage  of  28%  to  the  present 
investor. 

Why  British  Securities  are  Cheap. — Money  is 
greatly  in  demand  in  Britain  for  financing  exception- 
ally profitable  trade  and  good  securities  are  therefore 
being  sold  much  below  their  real  worth. 

No  British  Income  Tax  Payable  by  American 
Investors. — The  British  income  tax  on  dividends  from 
investments  is  heavy,  but  American  holders  of  British 
securities  are  exempted  from  these  taxes  by  making 
a  declaration  of  non-residence  in  Britain.  Any  Amer- 
ican or  British  banker  or  stockbroker  will  furnish 
declaration  forms  at  the  time  purchases  of  British 
securities  are  made. 

Government  Bonds.— British  Government  secur- 
ities are  perfectly  safe  investments,  and  are  likely  to 
yield  a  quick  profit  by  improvement  of  exchange. 
In  the  meantime  they  can  be  bought  to  yield  a  steady 
interest  of  from  5%  to  7%,  with  a  continual  increase 
in  value  of  the  principal.  The  5%  Loan,  repayable  at 
par  in  1922,  is  quoted  around  $370  per  £100  Bond, 
worth  at  normal  exchange,  $487.  The  same  bond, 
repayable  in  1927,  can  be  bought  for  $5  less. 

The  bonds  are  freely  saleable  in  New  York  and  are 
accepted  by  American  bankers  as  first  class  collateral, 

(61] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

Bonds  and  Stocks  of  British  Corporations.-— 

Most  of  the  important  enterprises  in  Great  Britain  are 
carried  on  by  incorporated  companies,  called  "Lim- 
ited Companies",  whose  stocks  are  non-assessable. 

Large  profits  can  be  made  by  American  investors 
buying  British  industrial  bonds  and  stocks;  at  present 
rates,  they  offer  excellent  security  and  yield  good 
dividends,  which  are  likely  to  continue,  and  even  in- 
crease, during  the  next  3  years. 

Public  Buying  of  Securities.— The  public  invests 
freely  in  the  bonds,  (mortgage  debentures)  and 
Preferred  and  Ordinary  shares  (stocks)  of  industrial 
and  mining  companies,  both  domestic  and  foreign. 

Present  Income  Yield. — British  industrial  secur- 
ities of  the  highest  class  can  be  bought  now  to  yield 
from  8%  to  10%  income,  and  the  restoration  of  nor- 
mal exchange  should,  in  a  very  few  years,  yield  fur- 
ther profits  of  at  least  25%  on  the  principal. 

A  description  of  the  various  classes  of  securities 
issued  by  British  companies,  and  the  methods  of 
dealing,  would  require  more  space  than  the  scope  of 
the  present  book  will  permit. 

They  are  explained  in  full  detail  in  another  book, 
"American  and  Foreign  Stock  Exchange  Practice  and 
the  Business  Corporation  Laws  of  all  Nations." 

Warning. — No  payment  should  be  made  to  any 
firm  advertising  bonds  or  stocks  for  sale  until  after 
careful  enquiry  has  been  made  as  to  their  credit  and 
reliability. 


See  Section  "What  to  Buy"  for  present  prices  of 

British  securities, 

[62] 


EXCHANGE  AND  FOREIGN  BONDS 

CANADA— HER  GROWING  WEALTH 

Development    of    Manufacturing. — The    war 

brought  Canada  into  extensive  manufacturing  for  the 
first  time  in  her  history.  Until  then  she  had  been 
fully  occupied  in  farming  and  in  developing  her  tim- 
ber and  mineral  resources. 

Exports. — Her  exports  were  mainly  raw  materials, 
which  other  nations  manufactured.  The  necessities 
of  war  compelled  the  building  of  new  manufacturing 
plants  in  Canada  and  extensions  of  existing  factories 
and  works.  Steel  shipbuilding  was  also  begun  on  a 
large  scale,  and  the  industries  connected  with  it  were 
established. 

Increase  in  Imports  Cause  of  Fall  in  Exchange. 
— The  profits  made  in  these  new  enterprises  have  en- 
couraged Canadians  to  make  huge  purchases  from  the 
United  States  of  materials  and  machinery  for  the 
development  of  her  industries  generally. 

The  effect  of  this  increased  buying  is  that,  whereas 
Canada's  exports  in  1917  exceeded  her  imports  by 
nearly  40  million  dollars,  her  exports  in  1918  were  109 
million  dollars  less  than  her  imports.  In  other  words, 
instead  of  having  40  million  dollars  to  receive  in  1918, 
she  owed  109  million  dollars.  This  means  that  she  has 
acquired  a  large  manufacturing  plant  by  investing 
her  war  profits  and  by  the  use  of  her  credit,  but  the 
purchase  will  be  very  profitable. 

This  indebtedness  has  caused  exchange  rates  to 
move  against  Canada,  as  regards  the  United  States, 
from  whom  she  bought  most  of  her  machinery  and 
materials. 

(63} 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

At  the  time  of  writing  (September,  1920)  the 
Canadian  dollar  is  worth  only  88c.  in  New  York, 
and  Canadians  buying  goods  from  the  U.  S.  must 
pay  $1.14  per  $1  of  the  American  invoice  price. 

Fall  Only  Temporary. — This  state  of  exchange 
cannot  last.  Canada  is  now  exporting  her  large  crops, 
for  which  she  is  getting  good  prices ;  the  cash  received 
will  be  used  to  pay  her  debts  to  the  United  States  and 
the  rates  of  exchange  will  soon  return  to  nearly  par. 

The  trade  connections  between  the  two  countries 
are  too  close,  and  the  boundaries  are  too  near,  to 
permit  any  such  great  difference  of  exchange  to  con« 
tinue  for  a  long  period. 

Canadian  Securities  Now  Cheap.— The  inter- 
esting part  of  all  this  to  the  American  investor  is  that, 
for  a  short  time  only,  good  Canadian  securities  can 
be  bought  by  Americans  12%  cheaper  than  they  can 
be  bought  by  Canadian  investors,  owing  to  the  Ameri- 
can dollar  being  at  a  premium. 

Example  of  Profits  to  be  Made.— A  $100  Bond 
which  would  cost  the  Canadian  just  $100  can 
be  now  bought  in  New  York  for  $88.  On  exchange 
returning  to  the  usual  rate,  this  Bond  can  be  sold  by 
the  American  investor  for  around  $100  in  New  York, 
the  profit  being  over  12%  (really  13^%  on  the 
amount  invested),  in  addition  to  the  interest  which 
the  bond  yields. 

There  are  a  large  number  of  industrial  bonds  and 
vStocks  which  can  be  bought  now  to  yield  larger  profits 
still,  but  the  investor  who  has  no  special  knowledge 
of  Canadian  securities  would  do  better  to  keep  to 
Government  and  Municipal  bonds  only. 

[64] 


EXCHANGE  AND  FOREIGN  BONDS 

Canadian  Government  and  Municipal  Bonds. 

— The  credit  of  the  Canadian  government  is  of  the 
highest  class,  and  its  bonds  are  safe  investments. 
The  credit  of  its  municipalities  is  also  good,  no  instance 
being  known  of  failure  to  keep  their  engagements. 
Municipal  bonds  are  generally  issued  to  yield  between 
4%  and  6%  interest,  but  they  can  be  bought  at  present 
so  cheaply  as  to  yield  from  7%  to  8%  interest.  The 
profit  from  the  rise  in  exchange  would  add  at  least 
12%  profit  on  the  principal. 


POINTERS— CANADA 

The  Canadian  dollar  is  at  a  premium  in  every 
country  except  the  U.  S.,  where  it  is  at  a  discount  of 
over  12%.  The  effect  of  this  is  that  at  present  the 
American  investor  can  buy  Canadian  bonds  12% 
below  Canadian  prices;  this  condition  will  not  last. 


Canada  is  the  best  customer  of  the  U.  S.  The 
chief  trade  centres  of  Canada  are  nearer  to  the  manu- 
facturing districts  of  the  U.  S.  than  are  most  of  the 
American  States. 


The  following  statistics  show  that  Canada  has 
recently  bought  from  the  U.  S.  more  than  she  has 
sold,  thus  making  the  U.  S.  her  creditor,  the  effect 
being  a  temporary  fall  in  the  exchange  rate  of  the 
Canadian  dollar. 

[65] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 
TRADE  OF  CANADA 


1918 

1919 

Imports 
From 

Exports  To 

Imports 
From 

Exports  To 

British  Isles  
Other  British  Coun- 
tries 

$81,324,283 
46,731,088 

$861,073,399 
43,953,531 

$73,035,118 
50,636,422 

$560,839,116 
65,557.002 

TOTAL  BRITISH. 
UNITED  STATES. 
All  Other  Countries. 
F* 
GRAND  TOTALS. 

$128,055,371 
791,906,125 
42,582,250 

$905.026,930 
440,811,400 
240,331,462 

$123,671,540 
746,920,654 
45,837,141 

$626,396,118 
477,695,659 
164,673,508 

$962.543,746 

$1,586,169,792 

$916,429,335 

$1,268,765,285 

Aggregate  of  Trade. 


$2,548,713,538 


$2,185,194,620 


GROWTH  OF  CANADIAN  MANUFACTURING 

CAPITAL  Invested  in  Manufacturing  and  Trans-  f  Year  1890  $    331,635,499 
portation \      "     1917     2,386,649,727 


INCREASE,  nearly  720% $2,055.014,228 


VALUE  OF  MANUFACTURES  AND 
TRANSPORTATION 

Value  of  PRODUCTS  I  Ycar  189°  *    368,696.703 

Value  ol  fKUUUClb ^      „     m7    3  015  577  920 

INCREASE,  nearly  718% $2,646,881,217 


Canadian  hydro-electric  stations  have  cost  365 
million  dollars.  Over  95%  of  Canadian  electric  power 
is  produced  from  water  power. 


During  the  war,  the  Canadian  Government  bought 
up  many  of  the  smaller  railroads,  with  a  view  to  ex- 
tending them  and  developing  the  districts  now 
inaccessible  by  rail. 

[66] 


EXCHANGE  AND   FOREIGNJ3ONDS 

The  Canadian  Government  Merchant  Marine  has 
arranged  a  world -wide  steamship  service  by  its  own 
steamers,  to  commence  August,  1920,  the  intention 
being  to  encourage  export  trade. 


CANADIAN  GOVERNMENT  WAR  LOANS 


When  Issued 

Total  Offered 
for  Subscription 

Total  Subscribed 

November,  1915 
September,  1916 
March,         1917 
November.  1917 
November,  1918 

50  million  dollars 
100         « 
150 
150 
300        " 

Over  113  millions 
"      195 
"      236 
"      419        " 
"      695 
(Victory  Loan) 

The  present  market  prices  of  Canadian  Bonds  are 
stated  in  the  later  section  "What  to  buy." 


[67| 


HOW  TO  MAKE  MONEY  IN  FOREIGN 


GERMANY— WILL  SHE  RECOVER? 
ARE  GERMAN  BONDS  SAFE? 

Since  the  end  of  the  war  Germany  has  been  busily 
engaged  marking  time,  instead  of  proceeding  with  the 
reconstruction  of  her  trade. 

Why  Germany  Has  Been  Standing  Still.— 
The  delay  in  returning  to  production  appears  to  have 
been  part  of  a  well  arranged  plan  of  bargaining  for 
concessions  in  the  terms  of  peace. 

There  appears  to  be  no  other  valid  reason  why 
Germany  should  not  have  made  as  much  progress 
towards  peace  conditions  as  have  been  made  by 
France,  Belgium  and  Britain  in  the  same  period. 
Both  France  and  Belgium  suffered  considerably  from 
wanton  damage  to  their  towns  and  villages,  mines, 
works  and  factories.  Germany  escaped  this  by 
acknowledgment  of  her  defeat.  Her  territories  have 
not  been  invaded,  her  mines,  factories  and  works  are 
uninjured,  and  she  has  not  suffered  more  than  France 
in  man-power.  Yet  both  France  and  Belgium  have 
almost  completely  repaired  their  injuries  and  resumed 
manufacturing,  while  Germany  is  still  waiting.  The 
obvious  conclusion  is  that  this  stoppage  is  part  of  the 
plan  for  escaping  liability  for  the  damage  caused 
during  the  war. 

The  recent  Spa  conference  has  shown  that  no  more 
concessions  will  be  granted  by  the  Allies,  and  it  may 
therefore  be  expected  that  Germany  will  now  return 
to  work. 

(681 


EXCHANGE  AND  FOREIGN   BONDS 

Germany's  Military  Failure  a  Real  Benefit  to 
Her. — Germany  has  yet  to  realise  that  her  failure  in 
war,  by  relieving  her  from  domestic  military  domina- 
tion, has  removed  the  greatest  obstacle  to  her  attain- 
ing real  prosperity,  of  a  lasting  nature.  Before  the  war 
of  1870  her  people  worked  hard,  lived  economically, 
and  were  contented  with  moderate  means.  The  in- 
dustrial progress  made  later  brought  a  period  of  over- 
production, extravagance,  and  speculation,  in  anticipa- 
tion of  the  coming  war  opening  new  avenues  of  wealth. 
It  is  now  seen  that  the  war  was  a  blunder. 

Prospects  of  Improvement. — There  are  signs 
that  firm  orders  have  now  been  given  for  political 
disturbances  to  be  discontinued  and  for  steady  work 
to  be  recommenced. 

Purchases  of  Bank  Exchange. — German  ex- 
change is  so  low  at  present  that  the  purchase  of  Ger- 
man securities  may  seem  to  be  a  gamble  but,  although 
it  may  require  from  5  to  7  years,  there  is  not  much 
doubt  that  German  exchange  will  return  to  its  former 
gold  level.  In  the  meantime,  purchase  of  exchange 
with  German  bankers  is  not  to  be  recommended,  but 
the  Bonds  of  German  municipalities  are  a  fair  specula- 
tion, as  a  lock  up  of  spare  capital,  on  the  Dutch 
system  of  waiting  patiently  for  results. 

Danger  of  Repudiation  of  German  War  Loans. 

— Future  German  governments  may  either  refuse  to 
pay  any  of  the  War  loans  issued  in  Germany  during 
the  war,  or  they  may  make  a  compromise  by  cancel- 
ling a  large  percentage  of  the  loans  and  issuing  new 
Government  bonds  for  reduced  amounts. 

[69] 


HOW  TO  MAKE  MONEY  IN   FOREIGN 

As  the  loans  were  subscribed  in  Germany  itself,  the 
question  is  one  for  settlement  between  the  German 
Government  and  the  German  people.  Americans 
are  warned  against  buying  German  Government  war 
bonds. 

Municipal  Bonds;  Their  Safety.— The  loans  to 
German  cities  are  of  a  totally  different  kind,  having 
been  raised  generally  to  pay  for  the  upbuilding  or 
extension  of  municipal  undertakings,  which  yield  a 
profit.  The  cities  have  still  on  hand  the  properties 
acquired  with  the  money  borrowed.  There  is  not  the 
same  reason  for  repudiation  of  these  loans  as  there  is 
for  refusing  to  pay  money  wasted  on  the  War. 

The  investor  in  German  securities  should  restrict 
himself  to  German  municipal  bonds  of  the  chief  towns, 
and  to  good  industrial  bonds. 

German  Income  Tax. — There  is  a  German  in- 
come tax  of  10%  on  interest  and  dividends  receivable 
from  bonds,  but  the  profits  obtainable  by  an  American 
purchaser  of  German  securities  are  so  large  as  to 
make  this  tax  of  no  importance. 


POINTERS—GERMANY 

German  good  class  industrial  5%  Bonds  are  quoted 
in  Germany  at  around  90%  of  their  face  value.  At 
the  exchange  rate  of  2  cents  per  mark  (nominal 
gold  rate  23.80  cents  per  mark)  a  1,000  mark  bond 
can  be  bought  from  New  York  for  $20.  By  holding 
until  German  exchange  returns  to  the  former  normal 
rate,  this  bond  could  be  sold  for  $238.  Every  im- 

[70] 


EXCHANGE  AND  FOREIGN  BONDS 

provement  in  the  present  rate  of  exchange  propor- 
tionately increases  the  value  of  the  bond,  which  can 
be  sold  at  any  time. 


City  of  Hamburg  4J^%  Bonds  of  1,000  marks, 
could  be  bought  early  in  June  at  $19  in  New  York. 
A  month  later  they  had  risen  to  $24.  At  the  normal 
rate  of  exchange  this  bond  could  be  sold  at  $238. 


The  Germans  are  highly  trained  workers;  having 
got  rid  of  most  of  her  enormous  military  expenditure, 
the  nation  should  prosper  more  than  before. 


For  details  of  present  market  prices  of  German 
currency  notes  and  bonds,  and  profits  to  be  made, 
see  later  Section,  "What  to  Buy." 


71  1 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

AUSTRIA— RESOURCES  OF  THE  NEW 
REPUBLIC 

The  Austrian  Empire  before  the  war  was  composed 
of  a  number  of  small  nations  which  did  not  agree  very 
well,  but  were  held  together  by  force. 

Former  Austrian  Dependence  on  Germany.— 
It  was  to  the  interest  of  Germany,  after  the  war  of 
1866,  to  keep  the  Austrian  Empire  intact  and  German 
military  power  was  always  ready  to  help  in  keeping 
restless  nationalities  well  under  the  control  of  the 
Austrian  authorities.  In  return  for  this  assistance, 
Germany  obtained  a  dominating  influence  over  the 
policies  of  the  Austrian  government  as  regards  both 
home  and  foreign  affairs,  and  was  enabled  to  make  a 
greater  use  of  it  on  account  of  the  former  Austrian 
Emperor  being  very  old  and  incapable. 

This  power  was  increased  by  Austrian  reliance  on 
Germany  for  financing  her  industries.  Austria  was,  in 
fact,  a  dependency  of  Germany. 

The  Release  of  the  Smaller  Nations.— The  Ger- 
man defeat  removed  the  iron  grip  over  the  Polish, 
Hungarian,  Balkan,  and  other  nationalities  which 
had  been  previously  unsuccessfully  struggling  for 
separation  from  the  Austrian  Empire ;  the  recognition 
of  their  independence  was  an  essential  part  of  the 
terms  of  peace. 

Shrinkage  of  Austrian  Area  and  Wealth. — By 
the  lopping  off  of  these  branches,  Austria  has  lost  very 
considerably  in  area  and  population,  and  still  more  in 
wealth.  The  central  portion  of  the  Empire,  Austria 
proper,  .formerly  acted  as  a  trade  intermediary  and  a 

[72] 


EXCHANGE  AND  FOREIGN  BONDS 

receiver  of  tribute  from  its  dependent  states.  The 
new  Austria  is  now  in  the  position  of  a  gentleman 
farmer  who  has  been  deprived  of  the  greater  part  of 
his  farms,  which  have  been  given  to  his  former  ten- 
ants, with  the  result  that  he  is  compelled  to  produce 
more  from  the  land  remaining  to  him  and  to  develop 
mining  and  manufacturing  to  help  out  his  farming 
profits. 

Prospects  of  Recovery. — This  change  has  thrown 
Austria  into  confusion,  but  her  agricultural  and  min- 
eral resources  are  still  sufficient  to  provide  the  Empire 
with  the  means  of  recovering  a  fair  degree  of  her 
former  prosperity,  especially  with  the  former  German 
restraint  on  competition  removed. 

Existing  Resources. — The  capital,  Vienna,  is  still 
a  centre  of  international  trade,  the  country  has  con- 
siderable deposits  of  metals  and  mineral  oil  which  are 
undeveloped,  and  her  forests,  which  have  always  been 
efficiently  managed,  will  yield  large  revenues  by  fur- 
nishing cheap  raw  material  for  her  established  wood 
working  industries.  She  has  some  good  engineering 
works. 

During  the  war  the  making  of  automobiles  was 
begun,  and  the  output  is  now  over  10,000  cars  per 
annum.  Austrian  works  have  also  specialized  in  the 
making  of  heavy  tractors  and  caterpillar  trains,  which 
are  in  demand  for  use  in  all  new  countries  in  process  of 
development. 

Further  Resources  Available. — Austria  is  an 
important  cattle  raising  country,  and  her  production 
of  live  stock  and  dairy  products  can  be  largely  in- 

[73J 


HOW  TO  MAKE  MONEY  IN   FOREIGN 

creased.  The  wheat  and  other  food  stuffs  consumed 
by  her  population  have  formerly  been  imported  from 
dependent  states,  but  more  attention  is  now  being 
given  to  the  raising  of  crops  within  her  own  boun- 
daries; land  previously  lying  in  fallow  near  Vienna 
has  recently  been  put  under  the  plough  and  it  gives 
profitable  employment  to  over  200,000  workers. 

There  are  large  undeveloped  salt  beds  near  Krems 
and  in  Styria,  the  production  from  which  would  find 
a  good  market  in  Czecho-Slovakia,  which  has  no  salt. 

The  provinces  separated  from  the  Empire  formerly 
supplied  cheaply  all  the  coal  needed  for  Austrian 
factories  and  works  and  no  attention  was  given  to  the 
development  of  the  valuable  seams  known  to  exist  in 
Styria  and  Upper  and  Lower  Austria.  These  are 
sufficient  to  supply  all  Austria's  needs.  There  is  also 
mineral  gas  in  Welsa  Haide. 

The  Empire  obtained  almost  all  the  iron  ore  it 
needed  from  the  Alpine  territory  now  ceded  to  Italy, 
but  there  are  equally  large  deposits,  in  Styria  and  other 
districts,  easily  capable  of  replacing  those  supplies. 

The  present  output  of  lead,  zinc,  and  copper  can 
be  largely  increased  without  great  expense. 

The  Lessons  of  the  War. — The  sufferings  and  loss 
caused  to  Austrians  through  the  war  have  proved 
the  foolishness  of  military  ambition  and  have  dis- 
posed the  population  to  the  less  showy  but  more 
comfortable  and  profitable  paths  of  peace.  Austria 
still  owns  considerable  amounts  of  foreign  invest- 
ments, yielding  good  revenues,  and  the  country  is 
well  placed  to  become  the  market  for  the  production 
of  the  neighbouring  States. 

[74] 


EXCHANGE  AND  FOREIGN  BONDS 

The  development  of  the  natural  resources  of  the 
country,  the  cultivation  of  trade  as  intermediaries, 
and  the  increase  of  plants  to  utilise  Austrian  raw  ma- 
terial, would  provide  steady  occupation  and  a  com- 
fortable living  for  the  whole  of  her  population. 

Examples  to  Follow. — The  prosperity  of  Switzer- 
land, the  Netherlands  and  Belgium,  which  have 
considerably  less  natural  resources,  gives  encourage- 
ment to  those  who  confidently  expect  that  Austria 
will  be  equally  successful. 

Opportunities  for  Americans. — She  now  needs 
capital  and  machinery  and  men  of  experience  to 
develope  her  mining  resources.  Here  is  a  chance  for 
American  enterprise.  The  climate  is  good,  living 
conditions  in  normal  times  are  pleasant,  and  there  is 
abundance  of  sport  of  all  kinds  for  Americans  staying 
in  the  country. 

Advice  on  Investments. — The  American  investor 
is  not  advised  to  place  any  of  his  funds  in  Austria  or 
its  former  dependent  States  at  present,  unless  under 
the  protection  of  thoroughly  reliable  agents. 

The  profits  to  be  made  are  large,  but  the  risks  are 
too  great  for  people  who  cannot  be  on  the  spot  them- 
selves or  obtain  thoroughly  reliable  men  to  protect 
their  investments. 


In  the  later  section  "What  to  buy,"  details  are 
given  of  Austrian  Bonds  and  their  present  market 
prices. 


[75] 


HOW  TO   MAKE  MONEY   IN   FOREIGN 


ITALY— HER  COMMERCIAL 
REORGANIZATION 

At  the  time  of  the  outbreak  of  the  war,  Italy  was 
largely  under  the  financial  control  of  Germany. 

Financing  of  German  Overseas  Trade  by 
Competitors. — German  export  trade  was  mainly 
financed  by  bills  of  exchange  which  were  sold  by  the 
German  banks,  in  enormous  quantities,  to  French, 
Swiss  and  British  bankers.  The  endorsement  of 
those  bills  by  the  German  Banks  made  them  better 
investments  in  the  eyes  of  foreign  bankers  than  the 
bills  of  exchange  of  the  exporters  of  their  own  nations. 

With  the  capital  thus  obtained,  the  German  ex- 
porters were  assisted  in  competing  strongly  for 
foreign  trade  and  were  unabled  to  give  longer  terms 
of  credit  than  their  rivals. 

German  Control  of  Italian  Banks. — The  Ger- 
man banks  used  part  of  their  capital  to  purchase 
controlling  interests  in  Swiss  and  Italian  banks, 
which  were  utilised  as  outlets  for  further  quantities 
of  German  bills  and  for  selling  German  industrial 
bonds  and  stocks. 

Additional  German  banks  were  established,  under 
Italian  names,  in  Milan  and  other  Italian  towns; 
these  banks  specialised  in  making  advances  to  Italian 
manufacturers  and  exporters. 

German  Grip  on  Italian  Commerce. — The 
result  was  that  when  war  was  declared,  Italian  com- 
mercial finance  was  entirely  dependent  on  Germany, 
and  the  German  banks  had  unloaded  almost  all  their 

[76] 


EXCHANGE  AND  FOREIGN  BONDS 

foreign  Bills  of  Exchange  on  to  Italian,  French, 
British  and  Swiss  bankers,  thus  tying  up  their  re- 
sources for  lengthened  periods. 

Effect  on  Italian  War  Policy.— Under  such 
circumstances,  Italy  dared  not  declare  herself  against 
Germany  until  Britain  and  France  could  support 
Italian  finance,  and  this  was  impossible  during  the 
early  stages  of  the  war. 

New  Banking  Corporations  for  Italy. — Italy 
and  the  other  nations  have  now  learned  their  lesson 
and  the  German  domination  of  Italian  finance  is  gone. 
The  largest  French  and  British  bankers  have  formed 
banking  corporations  to  operate  solely  in  Italy  and 
to  extend  their  trade  in  that  country.  The  banks  of 
both  these  nations  also  support  the  existing  Italian 
banks. 

Italian  War  Losses. — Though  Italy  did  not  enter 
the  war  until  its  later  stages,  her  industries  suffered 
considerably  through  their  financial  dependence  on 
Germany.  She  also  incurred  considerable  expense  in 
preparing  for  the  expected  attack  by  Germany  and 
Austria.  Italian  losses  in  men  were  comparatively 
small. 

As  the  result  of  the  war,  she  has  obtained  a  long 
desired  extension  of  her  northern  frontier,  at  the  ex- 
pense of  Austria,  but  her  claim  -to  almost  the  entire 
coast  of  the  Adriatic,  on  the  Austrian  side,  has  not 
been  agreed  to,  for  the  reason  that  it  would  shut  off 
from  the  sea  almost  the  whole  of  the  former  Austrian 
and  Hungarian  territories.  This  could  benefit  no 
nation  but  Italy,  while  it  would  seriously  retard  the 
development  of  the  new  nations. 

[77] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

Italian  Agriculture.— It  was  not  until  1860  that 
Italy  became  a  united  nation  and  won  her  complete 
freedom  from  Austria.  Since  then  her  agricultural 
production  has  increased  to  370  million  dollars  per 
annum,  being  five  times  its  former  amount. 

About  34  million  acres  are  cultivated,  of  which 
nearly  12  million  acres  are  in  wheat.  The  total  agri- 
cultural yield  is  estimated  to  be  worth  1360  million 
dollars,  of  which  wheat  accounts  for  235  million  dol- 
lars. The  climate  of  Italy  is  very  favorable  to  the  cul- 
tivation of  the  silk  worm,  and  the  production  of  raw 
silk  for  exportation  is  the  next  most  lucrative  business 
to  the  production  of  wheat.  About  11,000,000  Ibs. 
of  raw  silk  are  produced  per  annum. 

Manufacturing  Growth.— Until  1880  the  chief 
industry  was  agriculture.  From  1880  to  1913  great 
progress  was  made  in  developing  manufactures,  and 
the  yearly  output  rose  in  that  period  from  120  million 
dollars  to  600  million  dollars.  Of  her  population  of 
36,000,000,  about  three-fourths  are  now  employed  in 
agriculture  and  one-fourth  in  manufacturing  and 
trading. 

Iron  and  steel  industries  have  been  established  in 
Italy  and  powerful  foreign  companies  have  built 
extensive  plants  for  shipbuilding.  Machinery  and 
machine  tools  are  made  in  quantities  for  the  spinning 
and  weaving  mills,  and  for  paper  making. 

Prospects  for  U.  S.  Trade. — Italy  has  been  able  to 
supply  her  own  needs  in  agricultural  machinery  up 
to  the  present,  but  the  increased  cost  of  field  labor 
will  probably  cause  a  larger  use  of  machinery,  which 

[78J 


EXCHANGE  AND  FOREIGN  BONDS 

will  lead  to  imports  of  American  plows,  reapers  and 
other  machines. 

Large  automobile  factories  have  been  built  in  Milan, 
Turin,  and  other  centres,  their  production  is  chiefly  of 
high  grade  cars. 

Electrical  and  Engineering  Trades.— Italy  has 
built  up  a  considerable  trade  in  electrical  machinery, 
but  only  after  a  desperate  struggle  with  German  and 
Austrian  financial  and  manufacturing  interests.  Now 
that  this  restrictive  influence  has  been  removed,  she  is 
immensely  increasing  the  use  of  waterpower  for  de- 
veloping electric  power  for  manufacturing  and  lighting 
purposes.  Over  1,200,000  horsepower  is  already 
being  used,  and  it  is  estimated  that  this  can  be  in- 
creased to  six  million  horsepower. 

Trained  Workmen. — During  the  early  part  of 
the  war,  while  Italy  was  neutral,  Italian  engineering 
plants  were  largely  increased,  to  produce  war  mater- 
ials, and  numbers  of  Italians  emigrated  to  the  United 
States  to  work  in  American  machine  shops,  at  high 
wages.  These  men,  trained  to  American  methods, 
have  lately  returned  to  Italy  with  their  savings;  they 
make  a  powerful  reinforcement  of  skilled  labor  for 
still  further  increasing  her  manufacturing  strength. 

Italian  Emigration  to  America. — There  are 
twice  as  many  Italians  in  Brazil  as  there  are  Portu- 
guese, and  twice  as  many  Italians  in  Argentina  as 
there  are  Spaniards. 

The  Italian  has  for  some  years  been  the  hardworking 
artisan,  builder  and  small  trader  of  Europe  and  South 
America;  his  labor  is  also  highly  valued  in  the  con- 
struction of  railroads. 

[79] 


HOW  TO  MAKE  MONEY  IN    FOREIGN 

Large  numbers  have  settled  in  the  United  States, 
where  they  prosper  both  as  workmen  and  small  traders. 

Thrift  of  Wage -earners. —A  large  proportion  of 
the  Italian  workmen  return  to  their  own  country  after 
having  saved  enough  to  provide  them  with  the  means 
of  buying  a  farm,  an  olive  grove,  or  a  vineyard,  or  of 
establishing  a  small  business  there.  This  brings  a 
continuous  flow  of  capital  into  Italy;  the  earnings  of 
Italian  steamers  and  the  revenue  from  tourists  more 
than  make  good  the  excess  of  Italian  visible  imports 
over  exports. 

Italy's  Chief  Asset  Is  Her  Agriculture.— Al- 
though her  manufacturing  output  is  increasing  rap- 
idly, Italy  will  probably  make  more  profits  from 
agriculture  during  the  next  5  years,  as  during  that 
time  food  of  every  description  will  be  greatly  in  de- 
mand, at  high  prices,  all  over  the  world. 

With  her  spendid  climate  and  her  large  supply  of 
comparatively  cheap  labor,  Italy  should  derive 
sufficient  profits  from  this  source  to  considerably  im- 
prove her  financial  position  and  bring  her  exchange  to 
nearly  normal  within  the  5  years  stated. 

Trade  Agreement  with  Austria. — An  arrange- 
ment has  recently  been  made  for  complete  trade 
reciprocity  between  Austria  and  Italy,  and  for  an 
advance  by  the  latter  to  Austria  of  100  million  lire, 
being  about  20  million  dollars  at  normal  exchange. 
This  arrangement  is  to  the  advantage  of  both 
countries. 

Italian  Taxation.— For  the  fiscal  year  1919-1920 
the  Italian  government  reports  a  total  revenue  of 
seven  and  a  quarter  billion  lire. 

[80] 


EXCHANGE  AND  FOREIGN  BONDS 

This  exceeds  the  estimated  income  by  one-third,  and 

it  is  a  quarter  more  than  the  yield  of  the  previous  year. 

Example  of  Investment  in  Italian  Securities.— 

The  nominal  or  gold  rate  of  exchange  of  the  lira  is 
19.3  cents.  At  present  it  is  quoted  at  5  cents,  which 
leaves  a  large  margin  for  increase. 

The  Italian  3^%  Government  Bonds  can  now  be 
bought  at  a  quarter  of  their  face  value.  This  makes 
the  interest  on  the  outlay  14%  (4  times  3  }/£%). 

Until  the  outbreak  of  the  War,  these  bonds  were 
valued  at  94%  of  face  value ;  their  lowest  market  price 
in  1919  was  43  J^%  and  the  highest  69^%,  as  com- 
pared with  25%  now. 

Purchases  of  these  bonds  should  be  made  only 
through  responsible  brokers  and  bankers  in  the  U.  S. 

Tax  on  Bonds. — The  Italian  Government  levied 
a  tax  on  the  capital  value  of  all  bonds,  stocks  and  other 
personal  property  held  by  Italian  citizens  at  January 
1,  1920,  to  be  paid  by  20  annual  instalments,  which  is 
equivalent  to  a  tax  of  5%  per  annum  on  the  face  value, 
not  on  the  market  price.  Small  fortunes  were  ex- 
empted from  the  tax. 

Care  should  be  taken  to  avoid  buying  bonds  which 
are  subject  to  these  payments.  Those  portions  of  the 
Italian  War  Loans  which  were  subscribed  abroad 
(out  of  Italy)  are  exempted  from  this  capital  stock  tax. 
Deposits  of  money  with  Italian  banks  are  also  exempt. 


See  later  section,  "What  to  Buy",  for  details  of 
Italian  Bonds  and  of  profits  obtainable  by  their 
purchase. 

[81] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 


RUSSIA— PRESENT  AND  FUTURE 

Warning  as  to  Bank  Exchange  Purchases.— 

There  are  no  Russian  securities  which  the  American 
investor  could  safely  buy  at  present,  nor  can  the  pur- 
chase of  exchange  with  Russian  bankers  be  recom- 
mended, as  their  funds  are  liable  to  be  taken  from 
them  by  armed  force.  The  government  bonds  issued 
in  France  before  the  war  will  probably  be  recognized 
as  legitimate  indebtedness  when  order  is  restored. 

It  will  need  several  years,  and  some  hard  fighting, 
to  get  rid  of  the  gang  of  unscrupulous  adventurers  who 
are  at  present  in  power  in  Moscow  and  Petrograd,  and 
to  establish  a  sane  and  responsible  government, 
instead  of  the  present  terrorism. 

Difficulties  of  Government. — Russia  is  greatly 
lacking  in  railroads  and  good  roads.  For  this  reason, 
it  is  difficult  for  any  government  to  exercise  authority 
over  the  outlying  districts.  Even  in  the  days  of  the 
Czars,  the  governors  of  the  various  provinces  exercised 
absolute  powers  and  were  practically  uncontrolled. 

The  small  towns  and  villages  are  at  present  self- 
centred  and  make  their  own  regulations,  ignoring 
entirely  the  political  parties  in  power  in  the  large 
towns. 

It  will  not  be  until  Russia  is  provided  with  a  net- 
work of  railways  that  any  single  government  can  con- 
trol this  immense  empire. 

Several  Separate  Republics  Probable. — The 
most  likely  result  of  the  present  internal  struggle  is 
that  several  independent  republics  will  be  established; 

82  J 


EXCHANGE  AND  FOREIGN  BONDS 

in  the  west,  adjoining  Poland;  in  Siberia,  in  the  cen- 
tral provinces,  and  in  the  eastern  territories,  in  addi- 
tion to  the  already  established  Ukraine  Republic. 

Russia  a  Valuable  Market  for  U.  S.  Manu- 
factures.— When  responsible  governments  are  estab- 
lished and  can  offer  reasonable  security  for  life  and 
property,  Russia  will  be  the  most  valuable  market  in 
the  world  for  the  machinery  and  manufactured 
products  of  the  U.  S.  At  present  there  are  no  guar- 
antees of  this  kind,  and  new  Russian  investments  are 
best  left  alone  by  those  who  cannot  be  on  the  spot  to 
protect  their  own  interests. 

French    Influence   on   Russian   Affairs. — The 

French  are  large  holders  of  Russian  government  bonds, 
and  they  may  be  relied  on  to  do  everything  possible 
to  bring  order  into  Russia,  but,  even  with  the  civilizing 
influence  of  trade,  it  will  be  several  years  before  any 
Russian  government  can  be  safely  trusted  with 
American  funds.  When  a  responsible  government  is 
formed  it  will  have  to  raise  funds  by  a  new  foreign 
loan.  It  is  certain  that  this  will  not  be  subscribed 
abroad  unless  bonds  issued  before  1914  are  recognized. 

Dishonesty  of  Russian  Rulers. — Before  the  war, 
graft  in  Russia  was  so  common  and  so  wide  spread  that 
it  was  estimated  that  only  one  quarter  of  the  net 
proceeds  of  the  Russian  Municipal  Loans  subscribed 
in  France  ever  reached  the  municipal  coffers.  At 
present  it  is  so  easy  for  the  men  in  power  in  Russia  to 
collect  wealth  by  force  that  there  is  no  incentive  to 
issue  new  loans  or  to  encourage  trade  with  foreign 
nations. 

[83] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

Russian  Bank  Exchange.— The  best  advice  that 
can  be  given  to  intending  buyers  of  Russian  exchange 
is  "DONT".  If  already  bought,  write  it  off  as  a  loss, 
and  forget  it. 


What  to  Buy.— See  later  section,  "The  Best 
Foreign  Bonds  to  Buy",  for  details  of  Russian  bonds 
and  the  chances  of  profits  to  be  made  by  their 
purchase. 


POINTERS— RUSSIA 

The  State  Department  at  Washington  has  recently 
announced  that  trading  with  Russia,  by  Americans,  is 
now  permitted  in  all  kinds  of  goods  except  war 
materials. 


One  of  the  chief  reasons  why  the  Red  Armies  will 
fight  for  such  an  unsatisfactory  government  as  they 
have  at  present,  is,  that  this  government  has  given  all 
the  land  and  other  property  to  the  common  people, 
who  are  now  fighting  to  keep  it ;  they  are  told  that  any 
other  government  would  deprive  them  of  it. 


Not  very  long  ago  the  laborers  on  the  estates  of  the 
great  landowners  were  held  to  be  part  of  their  prop- 
erty, to  be  disposed  of  just  as  freely  as  the  horses  and 
cattle.  It  was  not  until  the  reign  of  the  father  of  the 
late  Czar  that  these  laborers,  called  "serfs",  were 
given  their  freedom. 

84] 


EXCHANGE  AND  FOREIGN  BONDS 

Similar  conditions  to  those  which  existed  in  Russia 
up  to  the  time  of  the  war,  existed  in  a  less  degree  in 
France,  before  the  French  Revolution  of  130  years  ago. 
History  is  repeating  itself.  France  passed  through  a 
reign  of  terror  similar  to  that  now  existing  in  Russia, 
but  she  recovered,  as  Russia  will.  Every  European 
nation  was  afraid  of  Communism  spreading  amongst 
its  own  people  then,  in  the  same  way  that  govern- 
ments are  afraid  of  Bolshevism  now;  this  later  phase 
of  Communism  will  die  out  like  the  previous  ones. 


185J 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

THE  UKRAINE  AND   ITS  RESOURCES 

The  Ukraine  and  Its  Resources. — The  Ukraine, 
which  includes  all  South  European  Russia  north  of 
the  Black  Sea,  has  formed  itself  into  a  separate  repub- 
lic, not  yet  recognized  by  the  U.  S.  Government.  It 
has  an  area  of  330,000  square  miles  and  a  population 
of  45  millions.  The  climate  is  good  and  its  land  has 
been  for  several  generations  one  of  the  chief  sources 
of  the  food  supply  of  Europe.  The  average  produc- 
tion is  over  7  million  tons  of  wheat;  4J^  million  tons 
of  rye,  5}^  million  tons  of  barley,  5%  million  tons  of 
sugar  beet,  and  11  million  tons  of  potatoes. 


The  large  estates  formerly  owned  by  absentee 
Russian  nobles  have  now  been  given  to  the  peasants 
for  farming.  The  Ukraine  contains  extensive  deposits 
of  iron  ores,  coal,  manganese,  mercury,  salt,  graphite 
and  sulphur. 

Her  oil  fields  produced  nearly  2  million  tons  of  oil 
in  1911,  this  output  being  only  exceeded  by  the  U.  S. 
and  the  Caucasus  oil  territories. 


The  chief  outlet  for  Ukrainian  exports  is  the  Black 
Sea  and  thence  to  the  Mediterranean. 

The  country  needs  good  roads,  railways,  river  and 
ocean  steamers,  and  agricultural  machinery.  Amer- 
ica has  the  opportunity  of  furnishing  these  and  of 
making  large  profits  by  supplying  capital  for  develop- 
ing the  country  still  further. 

But,  American  capital  invested  should  be  under  the 
control  of  resident  American  agents  only. 

[86] 


EXCHANGE  AND  FOREIGN  BONDS 


WHAT  TO  BUY  IN  SMALL  AMOUNTS 

Quantities  Purchasable. — Stockbrokers  and 
dealers  in  foreign  securities  do  not  care  to  accept 
orders  for  less  than  £100  sterling  ($360)  5,000  frs. 
or  lire  ($350)  10,000  marks  ($200),  etc. 

If  less  than  these  quantities  are  desired,  it  is  neces- 
sary to  find  others  to  join  in  the  purchase. 

Buying  Foreign  Currency  Notes. — Although  it  is 
not  always  possible  to  buy  foreign  securities  in  small 
amounts,  it  is  easy  to  invest  any  sums  in  currency 
notes  of  the  various  countries,  with  very  little  trouble. 

Market  Prices. — This  paper  money  is  perfectly 
safe  and  can  be  turned  into  cash  at  any  time,  at  a 
small  reduction  from  the  rates  of  exchange  quoted 
daily  in  the  newspapers.  In  every  town  there  are 
dealers  who  buy  and  sell  these  notes ;  the  dealers  buy 
at  a  little  less  and  sell  at  a  little  more  than  the  pub- 
lished market  prices  for  exchange. 

Calculation  of  Prices. — French  Notes  are  for 
5,  10,  20  and  50  frs.,  100  frs.,  and  1,000  frs.  With 
exchange  at  7  cents  per  franc,  the  50  franc  note  would 
be  worth  50  times  7  cents,  or  $3.50. 

The  values  of  Belgian,  Italian  and  Swiss  Notes  can 
be  found  in  the  same  way,  the  coinage  being  alike. 
Belgium  issues  1  and  2  franc  notes,  Italy  issues  1  and 
2  lire  notes,  in  addition  to  the  values  just  named. 

German  Notes  of  100  marks,  at  the  exchange  of  2c. 
per  mark,  would  cost  100  times  2  cents,  or  $2.  The 
notes  issued  are  5,  10,  20,  50  and  100  marks. 

(87] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

British  Government  currency  notes  are  for  10  shill- 
ings and  one  pound  sterling;  Bank  of  England  Notes 
are  for  5  pounds  sterling;  £10,  £20,  £50,  £100,  etc. 
The  rates  of  exchange  are  quoted  in  America  at 
dollars  and  cents  for  the  pound  sterling.  At  the  ex- 
change of  $3.60  a  £1  note  can  be  bought  at  slightly 
over  this  price,  say  $3.70;  the  standard  gold  value  is 
$4.87. 

The  currency  notes  of  the  British  Government  for 
10  shillings  and  one  pound,  and  the  Bank  of  England 
notes  for  £5  and  upwards,  are  all  legal  money. 

The  Bank  of  Scotland  and  the  Bank  of  Ireland  issue 
£1  notes  which  are  legal  money  in  Ireland  and  Scot- 
land respectively,  but  not  in  England  or  Wales.  Gov- 
ernment currency  notes  and  Bank  of  England  Notes 
will  be  accepted  throughout  the  British  Isles. 

Australia,  New  Zealand,  the  Union  of  South  Africa 
and  Jamaica,  also  issue  £1  notes;  these  usually  realise 
lOc  less  per  £1,  as  they  are  not  so  much  in  demand. 

Canadian  Notes  of  $1,  $5,  $10  and  upwards,  arc 
legal  money  in  Canada  only,  not  in  the  United  States. 
These  notes  can  be  bought  at  present  at  a  discount  of 
about  13%.  This  difference  will  be  only  for  a  short 
time. 

Gold  Money. — Gold  coins  of  foreign  nations  are 
at  a  premium;  the  present  price  of  gold  as  a  metal 
being  much  above  the  usual  price.  Gold  money  can- 
not, therefore,  be  obtained  at  the  same  prices  as  bank 
notes  or  bonds.  The  small  investor  is  advised  not  to 
buy  foreign  gold  money,  there  is  no  profit  in  it. 

Buy  Small  Units. — When  buying  foreign  currency 
notes,  it  is  better  to  buy  them  in  the  small  amounts, 

[88] 


EXCHANGE  AND  FOREIGN  BONDS 

because  they  are  more  easily  sold,  and  they  bring  a 
higher  price.  The  same  advice  applies  to  foreign  bonds. 

For  example,  a  purchaser  of  3,000  francs  of  French 
money  should  buy  60  notes  of  50  francs  each,  rather 
than  3  notes  of  1,000  francs.  In  the  same  way  he 
should  buy  30  bonds  of  100  francs  each,  rather  than 
3  bonds  of  1,000  francs. 

Savings  Invested  at  High  Interest. — Any  reader 
who  can  save  even  a  few  dollars  per  week  is  recom- 
mended to  buy  foreign  currency  notes  with  his  spare 
funds.  The  interest  which  would  be  received  from  a 
bank  cannot  compare  with  the  rate  of  profit  to  be 
obtained  by  the  rise  in  exchange.  These  notes  can  be 
bought  in  small  amounts  in  every  town,  and  they  can 
be  sold  for  cash  immediately  and  anywhere. 

Profits  can  be  taken  whenever  the  exchange  rate 
has  risen  a  few  cents  per  unit  of  money,  although  it  is 
better  to  hold  the  notes  for  one  or  two  years  until 
exchange  returns  to  the  normal  rates. 

Profits  to  be  Made — How  Soon? — The  following 
table  shows  the  high  rate  of  profits  obtainable  by  pur- 
chasing foreign  bank  and  currency  notes. 

The  largest  profits  are  to  be  made  in  French,  Bel- 
gian, and  Italian  notes,  the  quickest  profits,  although 
smaller,  will  probably  be  made  in  British  and  Cana- 
dian notes. 

Instead  of  buying  German  and  Austrian  Notes,  the 
money  should  be  invested  in  municipal  bonds  of  these 
countries. 

Russian  notes  should  not  be  bought  at  all,  nor 
Russian  bonds  except  those  issued  in  France  before 
1914. 

[89] 


HOW  TO  MAKE  MONEY   IN   FOREIGN 


PRICES  OF  FOREIGN  BANK  AND  CURRENCY  NOTES 
AND  PROFITS  ON  PURCHASES 


Country 

Normal  Rate 
of 
Exchange 

Prices  of 
Notes  on 
Aug.  23,  1920 

Profits  Obtainable 

In  Money 
Per  Unit 

Per  Cent 
on  Cost 

France  
Belgium  

19.30c  per  franc 
19.30c  per  franc 
19.30c  per  lira 
19.30c  per  drachma 
19.30c  per  franc 
$4.86  per  £1 
Equal  to  U.  S.  $ 
26.80c  per  krone 
26.80c  per  krone 
26.80c  per  krone 
40.20c  per  florin 
19.30c  per  peseta 

07.10c 
07.55c 
04.70c 
11.22c 
16.65c 
$3.67 
90cper$ 
14.65c 
2045c 
14.65c 
32.45c 
15.15c 

12.20c 
11.75c 
14.60c 
08.08C 
02.65C 
$1.19 
lOc 
12.15c 
06.35c 
12  15c 
07.75c 
04.15c 

171% 
155% 
310% 
72% 
16% 
32% 
11% 
83% 
31% 
83% 
24% 
27% 

Italy  

Greece  

Switzerland  
Great  Britain.  .  . 
Canada  

Norway  

Sweden  
Denmark  
Holland 

Spain     ... 

The  following  currencies  are  risky:  buy  Municipal  bonds  instead  of  Notea 


Germany  
Austiia 

23.80c  per  mark 
20  03c  per  crown 

02c 

He 

21.80c 
18.80c 

1090% 
3690% 

Czechoslovakia 

20.26c  per  krone 

01.90c 

18.46c 

1025% 

Russia  

51  46c  per  rouble 

01.35C 

Don't 
Russian 

Buy 
Notea 

On  Sept.  25,  1920,  prices  averaged  6%  less  than  shown  above,  but  these 
are  likely  to  be  the  bottom  prices. 

Advice. — Buy  Belgian,  French,  British,  Canadian 
and  Italian  currencies  in  this  order;  buy  some  of  each, 
rather  than  all  of  one  kind.  Sell  those  which  rise 
quickly,  and  buy  the  others  which  have  been  slower 
in  rising. 


[901 


EXCHANGE  AND   FOREIGN    BONDS 

WHAT  TO  BUY— IN  MODERATE  AND  LARGE 
SUMS 

Bank  Notes. — The  least  troublesome  way  of  in- 
vesting is  to  buy  foreign  bank  notes  and  currency 
notes.  Full  details  of  their  present  prices,  and  the 
profits  to  be  made,  have  been  given  on  the  previous 
pages.  Follow  the  advice  there  given  as  to  the  kinds 
to  be  bought. 

If  in  doubt,  ask  your  banker  to  give  you  the  name 
of  a  dealer  in  these  foreign  notes,  and  buy  direct.  Do 
not  buy  from  strangers,  only  from  established  firms. 

Bank  Exchange. — Do  not  buy  exchange  on  a 
foreign  banker,  except  as  a  preliminary  to  investment 
in  bonds  and  stocks. 

Funds  on  deposit  abroad  are  not  quickly  or  easily 
sold  and,  although  a  fair  interest  may  be  allowed  now, 
the  rates  are  likely  to  be  reduced. 

Why  Bonds  are  Better. — The  advantage  of  buy- 
ing bonds,  rather  than  bank  exchange,  is  that  the 
bonds  are  likely  to  increase  in  market  value,  as  well  as 
in  exchange  value.  Further,  the  purchaser  has  his 
investment  in  his  own  possession,  and  the  bonds  can 
be  used  immediately  as  security  for  borrowing,  if  the 
need  occurs. 

Foreign  Government  Bonds. — The  National 
Bonds  of  France,  Belgium,  Great  Britain,  and  Canada 
are  amongst  the  safest  investments  in  the  world. 
They  are  also  free  from  taxation  of  interest  or  prin- 
cipal. 

The  Italian  Bonds  (with  some  exceptions)  are  sub- 
ject to  a  capital  tax,  as  explained  in  the  section  of  this 

191] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

book  dealing  with  Italy.  Austrian  bonds  will  also 
shortly  be  subject  to  a  capital  tax. 

German  War  Loan  bonds  are  likely  to  be  reduced  as 
to  principal.  Russian  Government  Bonds,  issued 
prior  to  1914,  are  a  gamble,  with  the  chances  in  favor 
of  the  purchaser. 

Municipal  Bonds. — The  bonds  of  the  chief  cities 
of  France,  Belgium,  Great  Britain  and  Canada  are 
safe  and  sound.  German  and  Austrian  Municipal 
Bonds  are  also  good;  although  the  interest  may  be 
heavily  taxed,  the  probable  larger  profits  on  the  prin- 
cipal should  more  than  compensate  for  this. 

Industrial  Bonds. — British  industrial  bonds  and 
stocks,  shown  in  the  lists  on  later  pages,  are  good  and 
offer  excellent  chances  of  increase  in  value  within  the 
next  12  months. 

French  Railway  Bonds,  and  the  bonds  of  the  large 
German  industrial  firms  and  land  banks,  are  also 
recommended  as  likely  to  yield  good  profits  through 
the  increase  in  market  price,  and  by  reason  of  the  rise 
in  exchange. 

Which  Exchange  Rates  Will  Rise  Quickly.— 
Lists  of  the  best  investments  of  each  country  are 
given  in  the  following  pages.  French,  British,  Canad- 
ian and  Belgian  bonds  and  stocks  should  be  the  earliest 
to  rise  in  market  prices  and  exchange  values;  German, 
Italian,  Austrian  and  Russian  bonds  may  be  slower, 
but  the  margin  for  profits  is  greater. 

New  York  Stock  Exchange  Quotations;  Differ- 
ence Between  External  and  Internal  Loans.— 
Several  foreign  countries  have  issued  loans  in  New 
York,  of  which  the  principal  and  interest  are  payable 

[92] 


EXCHANGE  AND  FOREIGN  BONDS 

here  in  dollars.  The  variations  of  exchange  have  no 
effect  on  the  market  prices  or  the  interest  yield  of 
these  bonds.  Their  prices,  quoted  in  the  New  York 
newspapers,  should  not  be  taken  as  the  prices  of  the 
foreign  internal  loans.  These  latter  are  purchaseable 
at  considerable  reductions,  on  account  of  the  premium 
on  the  American  dollar.  The  guarantees  behind  the 
bonds  are  exactly  the  same,  and  the  internal  loans  will 
ultimately  yield  larger  profits  to  the  American  inves- 
tor, through  the  rise  in  exchange.  To  avoid  the  loss  on 
exchange,  interest  or  dividends  should  be  collected  in 
the  country  of  origin  and  re-invested  there. 

How  to  Buy. — First  of  all,  the  investor  must  de- 
cide what  securities  to  buy.  (See  later  paragraph 
"selecting  the  investment".)  The  author's  advice  is 
to  buy  bonds  of  two  or  three  countries,  instead  of 
those  of  one  country  alone.  The  next  step  is  to  decide 
whether  to  buy  in  New  York  or  in  the  country  whose 
bonds  or  stocks  are  to  be  purchased. 

Foreign  internal  Government  bonds  and  municipal 
bonds  are  not  listed  on  the  New  York  Stock  Exchange, 
but  there  are  a  number  of  firms  in  New  York  special- 
ising in  their  purchase  and  sale. 

Methods  of  Buying. — One  method  of  purchasing 
(only  available  for  large  amounts)  is  to  place  the  order 
direct  with  a  member  of  the  Stock  Exchanges  of 
Paris,  Brussels,  Milan,  London,  or  Berlin.  Payment 
may  then  be  made  by  a  banker's  draft,  payable  in 
these  towns,  which  can  be  purchased  from  any  of  the 
large  American  banks,  or  the  money  may  be  cabled 
through  the  bank.  The  buying  order  will  not  be 

[93] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

executed  by  the  foreign  stockbroker  until  he  actually 
receives  the  funds. 

If  the  intending  purchaser  does  not  know  any  of  the 
stockbrokers  in  the  foreign  towns,  he  may  give  the 
order  to  his  American  banker  to  have  the  purchase 
made  through  his  banking  agents  abroad.  In  this 
case  the  purchase  price  will  not  be  known  at  once,  and 
there  may  be  delay  in  execution  of  the  order,  as  this 
is  not  a  part  of  the  usual  duties  of  a  banker. 

Another  method  is  to  ask  for  a  firm  quotation  from 
a  dealer  who  makes  a  special  business  of  trading  in 
foreign  bonds.  These  dealers  are  in  constant  touch 
with  the  foreign  bond  markets. 

Some  of  these  firms  require  the  whole  purchase 
price  to  be  paid  with  the  order,  others  will  accept 
25%  deposit,  the  balance  being  payable  on  delivery 
of  the  securities. 

Buying  on  Margins. — A  few  of  the  large  firms 
will  buy  on  a  margin  of  about  30%  and  lend  the 
remaining  70%  as  a  time  loan.  Foreign  stockbrokers 
will  do  the  same,  for  customers  they  know,  but  the 
carrying  charges  for  the  loan  would  then  be  heavier. 

Loans  on  Purchases. — If  a  loan  is  required,  the 
best  plan  is  to  pay  the  broker  in  full,  take  up  the 
securities  and  deposit  them  with  one's  own  banker, 
as  security  for  a  time  loan.  The  Bonds  can  then  be 
sold  for  cash  at  any  time;  the  sale  can  be  made 
through  any  member  of  a  stock  exchange  or  firm  of 
curb  brokers,  or  through  a  dealer. 

Delays  in  Delivery. — Several  of  the  New  York 
dealers  in  foreign  bonds  carry  stocks  of  the  chief 
securities  and  can  deliver  at  once.  In  other  cases 

[94] 


EXCHANGE  AND  FOREIGN  BONDS 

there  may  be  a  delay  of  four  weeks  or  longer  before 
the  securities  reach  New  York  from  abroad. 

Bearer  and  Registered  Bonds. — Most  of  the 
foreign  bonds  are  bearer  bonds,  transferable  by  the 
mere  handing  over.  Municipal  and  industrial  bonds 
are  also  generally  to  bearer,  but  some  British  munici- 
pal bonds,  and  almost  all  British  stocks,  are  registered 
and  the  delay  in  delivery  may  then  extend  to  two 
months.  For  this  reason  it  is  advisable  to  deal  only 
with  first  class  firms. 

Selecting  the  Investment. — The  prospects  of 
increases  in  value  of  the  Bonds  of  the  various  foreign 
countries  have  been  discussed  in  separate  chapters 
of  this  book.  These  should  be  read  carefully.  If  the 
funds  to  be  invested  can  be  left  for  long  periods,  they 
may  be  invested  in  bonds  of  the  countries  whose 
currencies  are  at  the  largest  discount,  such  as  Italy, 
Germany,  Austria,  and  Russia. 

Funds  which  may  be  required  in  a  year  or  less 
should  be  invested  in  British,  Canadian,  French  or 
Belgian  securities,  as  these  are  the  most  likely  to  rise 
rapidly.  Argentine  and  Japanese  Sterling  Bonds  will 
move  with  the  British  exchange. 

Profits  Realisable  at  Any  Time.— The  largest 
profits  will,  of  course,  be  made  by  holding  the  securi- 
ties until  the  complete  restoration  of  normal  exchange 
rates,  but  profits  may  be  taken  at  any  time  exchange 
has  risen  appreciably.  The  newspapers  show  the 
daily  changes  in  exchange  rates;  the  prices  of  bonds 
rise  or  fall  in  the  same  proportions.  Interest  coupons 
be  collected  through  any  bankers. 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

Avoiding  Taxation. — Most  of  the  Government 
bonds  are  free  from  taxation  by  the  governments  which 
issue  them,  for  other  securities  the  broker  or  banker 
through  whom  the  purchase  is  made  should  be  asked 
to  furnish  the  forms  of  declaration  which  exempt  the 
American  holder  from  foreign  taxation  on  the  interest 
receivable. 

Borrowing  on  Bonds  Purchased. — One  great 
advantage  of  bearer  bonds  is  that  no  written  transfer 
is  required,  they  are  transferred  by  being  simply 
handed  over. 

For  this  reason,  no  formalities  are  required  in 
using  them  as  security  for  loans.  The  best  foreign 
bonds  are  accepted  by  American  bankers  as  good 
security  for  loans.  The  purchase  of  such  bonds  is  a 
very  profitable  use  of  surplus  money  and  loans  can  be 
obtained  on  them  for  about  70%  of  their  market 
values  as  at  the  date  of  borrowing. 

Where  an  arrangement  can  be  made  with  a  banker 
for  a  time  loan,  it  pays  to  buy  a  larger  quantity  of  the 
securities  and  borrow  part  of  the  money  required. 

Here  is  an  illustration: 


[96] 


EXCHANGE  AND  FOREIGN  BONDS 

EXAMPLE  OF  INCREASED  PROFITS  BY 
BORROWING  ON  BONDS 


Using  Borrow- 
all  own  ing  two- 
money  thirds 

Purchase  of  Foreign  Securities,  Cost $10,000  $30,000 


Interest  received,  5%  nominal,  say  8%  on  the 

Cost 800  2,400 

Proceeds  of  Sale,  after  1  year,  on  rise  of  20%.     12,000         36,000 


Total  Receipts 12,800  38,400 

Less  Cost,  as  above 10,000  30,000 

GROSS  PROFIT $  2,800  $  8,400 

Less  Interest  8%,  and  commissions  paid  to 

Banker  on  money  borrowed,  $20,000 1,600 

NET  PROFIT..                                   .  $  2,800  $  6,800 


Percentage  of  net  profit  on  outlay  of  $10,000 
of  own  money 28%  68% 

The  profits  to  be  made  are  so  large  that  it  is  well 
worth  while  to  increase  them  by  borrowing.  High 
interest  rates  on  the  loans  are  more  than  compen- 
sated by  the  profits  ori  the  principal. 

Collecting  Foreign  Debts. — Many  American 
firms  have  balances  owing  to  them  from  their  foreign 
customers,  or  from  Branch  houses  abroad,  which  are 
being  delayed  in  remittance  until  exchange  rates 
recover. 

It  is  suggested  that  these  could  be  collected  at  once, 
by  investing  the  amounts  in  good  foreign  bonds  at  the 

[97] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

present  low  prices  and  having  the  securities  sent  over. 
They  could  be  held  as  an  investment  and,  if  funds  are 
required,  about  70%  of  their  market  price  could  be 
borrowed  on  them  from  the  firm's  bankers.  Mean- 
while they  would  be  improving  very  considerably  in 
value. 

Selling  Against  Payment  in  Foreign  Bonds. — 
The  present  low  European  exchange  rates  are  pre- 
venting American  exports  on  account  of  the  resulting 
higher  prices  to  be  paid  by  the  foreign  purchaser. 

Business  would  be  made  easier  if  the  American 
exporter  would  agree  to  accept  payment  in  foreign 
bonds.  The  profits  would  be  derived  ultimately  from 
the  rise  in  exchange  values.  In  the  meantime,  the 
bonds  could  be  used  as  collateral  security  for  a  loan 
from  an  American  banker. 


Security  Behind  the  Foreign  Bonds.— In  the 

earlier  sections,  details  are  given  of  the  present  indus- 
trial and  financial  position  of  each  of  the  chief  Euro- 
pean nations. 

These  sections  should  be  referred  to  in  connection 
with  any  intended  investment  in  the  currencies  or 
bonds  of  those  countries. 


[98] 


EXCHANGE  AND  FOREIGN  BONDS 


THE  BEST  BONDS  TO  BUY 

Note. — The  prices  stated  will  vary  from  day  to  day, 
according  to  the  course  of  exchange. 

During  the  time  this  report  has  been  in  preparation, 
foreign  rates  of  exchange  have  been  steadily  falling, 
for  reasons  explained  in  earlier  pages,  but  rises  will 
probably  begin  at  the  end  of  October,  1920. 

The  purchase  prices  of  bonds  quoted  in  the  follow- 
ing pages  are  likely  to  be  higher  from  October  on- 
wards, because  a  rise  in  exchange  rates  will  cause  in- 
creased buying  of  foreign  bonds. 

The  purchase  prices  of  bonds,  quoted  in  the  ex- 
amples showing  probable  profits  to  be  made,  are  those 
existing  at  the  end  of  September,  1920. 


ARGENTINA 
(For  Purchase  through  London) 

GOVERNMENT  BONDS 

5%  Internal  Gold  Loan  of  1909.— Interest  pay- 
able March  1  and  September  1  of  each  year.  Total 
issue  10  million  pounds  sterling. 

Bonds  of  20,  100,  200  and  1,000  pounds  sterling. 

Out  of  the  total  issue  only  1-5  of  the  loan  is  listed  in 
New  York.  The  balance  are  called  unlisted  bonds. 

These  bonds  are  repayable  in  New  York  at  $4.865 
per  pound  sterling. 

Price  in  London,  £87^  per  £100  bond,  Aug.  9, 1920. 

At  the  exchange  of  $3.70,  the  £100  bond  would  cost 
$323.75. 

(991 


HOW  TO  MAKE  MONEY  IN   FOREIGN 

The  redemption  price  is  £100,  equal  at  normal  ex- 
change to  $486.65,  leaving  a  margin  of  $162.90  for 
increase  in  value. 

4%  Railway  Recissions. — Bonds  of  20,  100,  200 
and  1,000  pounds  sterling. 

Interest  payable  half  yearly,  by  coupons. 

Price  in  London,  Sept.,  1920,  £51^  per  £100  bond. 

Highest  quotation  in  1919,  £89,  lowest  £56^. 

Price  July  27,  1914,  before  the  War,  £81^,  being 
£30  more  than  the  present  price. 

Cost  in  London,  Sept.,  1920,  £51^  at  the  exchange 
of  $3.70,  equal  to  $190.55. 

Value  at  £81^,  at  normal  exchange  of  $4.86, 
$396.10. 

Margin  of  possible  profit,  $205.54  or  188%. 


By  purchasing  through  London  there  is  an  advan- 
tage of  25%  to  30%,  on  account  of  the  discount  on 
British  exchange. 


1100} 


EXCHANGE  AND  FOREIGN  BONDS 

AUSTRIA  AND  THE  BALKANS 

MUNICIPAL  BONDS 

City  of  Vienna,  4%,  $6  per  1,000  kronen. 


City  of  Vienna,  4^%»  $6.50  per  1,000  kronen. 

City  of  Vienna,  5%,  (new)  $7  per  1,000  kronen. 

City  of  Buda  Pesth,  4J^%,  $7  per  1,000  kronen. 

City  of  Prague,  4%,  $20  per  1,000  kronen. 

City  of  Carlsbad,  4%,  $20.50  per  1,000  kronen. 

A  City  of  Vienna  Bond  for  1,000  kronen  bought  now 
at  $6,  has  a  face  value  of  $203. 

For  anyone  who  can  afford  to  leave  their  money 
invested  for  several  years,  the  purchase  of  the  above 
bonds  is  likely  to  be  profitable.  They  are  not  likely 
to  rise  rapidly. 


For  description  of  the  present  financial  position  of 
Austria  see  the  earlier  Section  "Austria — Resources  of 
the  new  Republic". 


[  101J 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

BELGIUM 

(All  the  Following  are  Free  from  Belgian 
Taxation) 

GOVERNMENT  BONDS 

3%  Perpetual  Rente. — Interest  payable:  Series  1, 
January  and  July,  Series  2,  March  and  November, 
Series  3,  February  and  August. 

Each  bond  of  1,000  francs  is  worth  $193  face  value, 
at  normal  exchange  of  19.3  francs  to  the  $1. 

Price  in  London,  September,  1920,  54J^%- 

During  1919  the  highest  price  was  72%  and  the 
lowest  55 ;  on  July  27,  1914,  a  week  before  the  war,  the 
price  was  79J^. 

On  the  basis  of  recovery  to  79 }/%  the  margin  of 
possible  profit  is  25  on  a  cost  of  54J/£,  or  nearly  46%. 

5%  Restoration  Loan  of  1919. — Interest  payable 
June  1  and  December  1. 

In  bonds  of  1,000  francs,  worth  $193  at  normal 
exchange. 

Present  quotation,  for  purchases  in  New  York,  about 
$87  per  1,000  franc  bond;  value  at  normal  exchange 
$193,  margin  for  profit  $106,  or  nearly  122%. 

There  are  other  Belgian  bonds  issued  and  quoted  in 
New  York  which  do  not  give  90  much  scope  for  in- 
crease in  values,  being  payable  in  dollars,  at  fixed  ex- 
change. 

The  bonds  payable  in  francs  offer  the  best  chances 
of  profits. 


A  brief  description  of  the  present  economic  position 
of  Belgium  is  given  in  an  earlier  Section  "Belgium — 
Wealth  and  Resources". 

[  102  ] 


EXCHANGE  AND  FOREIGN  BONDS 

BRITISH  WAR  LOANS 

There  are  several  British  Loans  issued  in  the  U.  S., 
of  which  the  principal  and  interest  are  payable  in 
New  York,  in  dollars,  at  the  fixed  rate  of  exchange  of 
$4.8665  per  pound  sterling. 

There  are  no  opportunities  of  profit  on  these  bonds 
by  improvement  of  exchange  and  they  are,  therefore, 
omitted  from  the  following  list. 

Internal  War  Loans,  Free  from  British  Income 
Tax.— Bonds  of  £50,  ($243.32^),  £100,  ($486.65) 
and  multiples  of  £100. 

Interest  payable  half  yearly,  in  London,  in  sterling. 


Price  In 
London 
Sept.  1920 

1919  Prices 

Highest 

Lowest 

3}$%  Loan  of  1914,  redeemable 
4     %       "     *  1917.           • 
5     %       *     "  1917,           • 
4     %       •     «  1919, 
at  par  after  Sept    1920 

1925-1928... 
1929-1942  .  .  . 
1929-1947  .  .  . 
by   drawings 

95^ 
85 

78 

103 

H 

The  4%  and  5%  loans  should  rise  to  par  value 
within  the  next  two  years. 

The  4%  1919  loan  now  costs  £78  per  £100  bond, 
which  at  the  exchange  of  $3.70  per  pound  sterling 
shows  a  cost  of  $288.60.  At  the  normal  exchange  of 
$4.86  this  bond  would  be  worth  $486,  leaving  a  margin 
of  $197.40,  or  68%,  for  increase  in  value. 

The  possible  profits  on  the  other  bonds  can  be 
gauged  from  the  figures  shown  above. 


[103] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 


SECURITIES  TO  BUY,  BRITISH,  ETC. 

BRITISH  MUNICIPAL  AND  COUNTY  BONDS 

(£100  bonds,  Face  Value  at  Normal  Exchange, 

$486.65) 


Price  in 
London 
Sept.,  1920 

Cost  at 
J3.60  per  £1 

3H%  Birmingham  194< 
6     %  Birmingham,  193 
6    %  Bristol   1930-40 

i  

£59>* 
99  >* 
\Q\H 
SOX 
96 
98 
99^ 
60*A 
101  H 
82>* 
95 
58 

95 

$213.30 
358.20 
366.30 
182.70 
345.60 
352.80 
358.20 
218.70 
365  40 
297.00 
342.00 
208.80 

342.00 

6-40 

3     %  Croydon.  1940-61 
6     %  Croydon 

3 

6     %  Essex   1940-60 

6     %  Hertfordshire,  19 
3)4%  Liverpool 

40-60           

6     %  Liverpool.  1930-i 
5     %  Corporation  of  L< 
SH% 
3    %  Plymouth,  1942. 

,0  

radon,  1945-65      

•         1928  

6    %  Coventry 
6     %  Lincoln 
6     %  Middlesborough 
6    %  South  Shields 

New  Issues  

FOREIGN  GOVERNMENT  BONDS 
TRADED  IN  LONDON 

(Usually  in  £100  or  £500  Bonds) 


Price  in 
London 
Sept.  1920 

Prices  in  1919 

Price 
July  27, 
1914 

Highest 

Lowest 

5%  Argentine.  Issued  1886-7  

£91 
59 

87 
55^ 
68*4 

48 

99 

78>4 

79H 
95H 

SOJ* 

83 
<*>X 

57* 
73 

44H 

102 
86^ 

74 
98 

87 

5%  Brazilian  Loan  of  1895  

5%  Buenos  Aires,  Funding  1915  
4%  Japan,  Sterling  Loan  of  1899  
5%  Japan,  Sterling  Loan  of  1907  
5%  Mexico.  Ext.  Cons.  Gold  Loan,  .  . 
1899  

[104] 


EXCHANGE  AND  FOREIGN  BONDS 


BRITISH  INDUSTRIAL  STOCKS  TO  BUY 
(Ordinary  Shares  unless  Otherwise  Stated) 


London 
Price* 
Sept..  1920 
Shillings 
and  Pence 

Cost  at 
$3.60 
pcr£l 

Automobiles 
Darracq  (S  D  T   Co  ) 

23s. 

$4  14 

Rolls-  Roy  cc 

32s  6d 

5  85 

Iron  and  Steel 

Armstrong  Whitworth  (Engineering)              

26s.  6d. 

4.77 

Beyer  Peacock  5^%  Pref.  (Locomotives)         

18s.  9d. 

3.37 

Vickers  Ordinary  (Electrical  Works)  

24s  6d. 

4.41 

Vickers  5%  Preference        

16s.  6d. 

2.97 

Vickers  New  7%,  7-Year  £100  Notes,  due  1927.  .  .  . 
Miscellaneous 

Fine  Cotton  Spinners,  5%  Preference  

95% 
15s.  6d. 

342.00 
2.79 

Smithfield  &  Argentine  Meat  Co  

14s.  6d. 

2.61 

Spiers  &  Pond  (Restaurants  and  Hotels)  

20s.  6d. 

3.69 

Lever  Bros.,  7%  Preference  (Soap  Manufrs.)  
Lever  Bros    8%  "A"  Pref 

17s.  9d. 
20s. 

3.19 
3  60 

oils 

Lobitos  

85s. 

15.30 

Mexican  Eagle  Ordinary 

£10 

36.00 

Mexican  Eagle  8%  Preferred                          .  . 

£10 

36.00 

Shell                                                      

£  6M 

22.50 

U05] 


HOW  TO  MAKE   MONEY  IN   FOREIGN 


COLONIAL  GOVERNMENT  BONDS 
TRADED  IN  LONDON 

(£100  Bonds,  Face  Value,  at  Normal  Exchange, 
$486.65) 


Price  in 
London 
Sept.  1920 

Prices  in  1919 

Price 
July  27, 
1914 

Highest 

Lowest 

SH%  Australia,  1Q22-27  

£94 
62tf 
73 
90X 
87 

97 
80 

74^ 

102 
&6X 
96^ 
103  X 

97 

77M 
89J* 
98 

98 

3H%  Canada   1930-50 

4     %  Canada.  1920-60  

4>4%  Canada   1920-25 

4M%  Queensland,  1920-25  

5M%  New  South  Wales  Debs. 
1922-32 

4     %  Quebec  (Sterling  Bonds)  1934. 
4     %  South  Australia,  1916-36  

The  quotations  for  all  the  above  mentioned  bonds 
and  stocks  change  from  day  to  day  and  alterations 
in  rates  of  bank  interest  may  cause  important  varia- 
tions. The  prices  shown  are  given  as  examples  only, 
and  not  as  firm  quotations.  The  stocks  listed  above 
are  sound  and  are  likely  to  rise  in  price  during  the 
next  12  months. 

British  securities  of  all  kinds  are  at  present  very  low 
in  price.  Owing  to  the  large  demand  for  money  for 
purchasing  raw  materials  and  machinery,  for  exten- 
sions of  manufacturing,  and  the  restriction  of  credits 
by  the  British  Banks,  good  securities  have  been  thrown 
on  the  market  in  large  quantities,  for  the  purpose  of 
obtaining  ready  money.  This  has  caused  the  present 
fall  in  prices,  through  the  sellers  being  more  numerous 
than  the  buyers. 

[106] 


EXCHANGE  AND  FOREIGN  BONDS 

EXAMPLE  OF  PROFITS  OBTAINABLE  ON 
BRITISH  SECURITIES 

War  Loans.— The  5%  British  War  Loan  of  1917 
is  now  purchaseable  at  £85  per  £100  bond.  At  the 
exchange  of  $3.70  to  the  pound  sterling,  the  cost 
would  be  85  times  $3.70  or  $314.50.  This  bond  should 
be  saleable  at  over  £100  within  the  next  two  years.  In 
1919  it  reached  £96^.  Taking  this  as  a  basis  and 
selling  when  the  exchange  is  restored  to  the  normal 
rate  of  $4.86,  which  should  be  the  case  within  two  years 
from  now,  the  proceeds  of  the  sale  would  be  96J/£ 
times  $4.86,  making  $468.99.  The  profit  would  be 
$154.49  being  over  49%  on  a  cost  of  $314.50.  This  is 
in  addition  to  interest  of  5%  on  the  nominal  value  of 
the  bond,  nearly  6%  on  the  amount  invested. 

The  4%  loan  of  1919  shows  a  still  better  chance  of 
profit.  The  cost  would  be  78  times  $3.70,  or  $288.60. 
If  sold  at  the  lowest  price  reached  last  year,  98 %,  when 
the  exchange  returns  to  $4.86,  the  amount  realised 
would  be  $479.92.  The  profit  would  be  $191.32  on  an 
investment  of  $288.60,  or  66%,  in  addition  to  the 
interest  received. 

Municipal  and  Colonial  Bonds. — The  Municipal 
and  County  Bonds  should  show  profits  of  30%  to 
40%  within  the  next  two  years  by  rise  in  market  prices, 
plus  rise  in  exchange  rates.  All  of  the  Colonial  Bonds 
shown  should  yield  similar  good  profits. 

Industrial  Stocks  and  Oils. — The  short  list  given 
shows  those  which  are  the  most  likely  to  rise  consider- 
ably in  selling  values  during  the  coming  two  years. 
They  should  be  sold  when  a  considerable  rise  takes 

[107] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

place;  as  the  rate  of  exchange  will  have  risen  during 
the  same  period,  the  profits  should  be  satisfactory. 


In  the  earlier  Section,  ''Great  Britain — Is  She  Sol- 
vent?" details  are  given  of  the  present  financial 
position  of  the  U.  K. 


CANADA 

INTERNAL  WAR  LOANS 
(Free  From  Canadian  Income  Tax) 
Bonds  of  $50,  $100,  $500,  and  $1,000. 


5     %  Loan  of 

1915, 

due  Dec.  1 

1925, 

interest  payable  June 

and  Dec. 

5     %  Loan  of 

1916. 

due  Oct.    1 

1931, 

interest  payable  Apr.  ! 

and  Oct. 

5H%  Loan  of 

1917, 

due  Dec.  1 

1922. 

interest  payable  June  : 

and  Dec. 

S^%  Loan  of 

1917. 

due  Dec.  1 

1927, 

interest  payable  June 

and  Dec. 

5H%  Loan  of 

1917, 

due  Dec.  1 

1937, 

interest  payable  June 

and  Dec. 

5H%  Loan  of 

1918. 

due  Nov.  1 

1923, 

interest  payable  May 

and  Nov. 

5>3%  Loan  of 

1918. 

due  Nov.  1 

1933, 

interest  payable  May 

and  Nov. 

SH%  Loan  of 

1919. 

due  Nov.  1 

1924. 

interest  payable  May 

and  Nov. 

5>4%  Loan  of 

1919. 

due  Nov.  1 

1934, 

interest  payable  May 

and  Nov. 

All  of  the  above  Government  loans  can  be  bought 
in  New  York  at  about  13%  below  their  Canadian 
market  prices.  On  the  restoration  of  normal  exchange 
between  Canada  and  the  U.  S.  these  bonds  can  be  sold 
at  a  profit  of  15%  on  cost. 

External  loans,  quoted  in  New  York,  are  payable  in 
New  York  as  regards  both  principal  and  interest; 
these  external  loan  bonds  do  not  give  so  much  oppor- 
tunity for  increase  in  value  as  the  internal  loans. 

[1081 


EXCHANGE  AND  FOREIGN  BONDS 
SECURITIES  TO  BUY— CANADIAN 


Price  in 

Difference, 

Price  in 

Montreal 

Being  Possible 

New  York 

Aug.,  1920, 

Profit  On 

Aug..  1920 

Per  $100  Bond 

Principal 

Canadian  Government 

Bonds  of  $100  each: 

5H%  due  1922  

$86.84 

$99 

$12.16 

5H%  due  1924  

86.00 

98 

12.00 

5H%  due  1927  

87.29 

99  X 

12.21 

S%%  due  1937  

88.60 

101 

12.40 

Average    possible    Profit    On 

Cost.  15% 

Province  and  City  Bonds: 

6%  Alherta,  due  1923  

$82.65 

$95 

$12.35 

6%  Ontario  (Prov.),  due  1928 

80.25 

92tf 

12.00 

6%  Nova  Scotia,  due  1925  .  . 

80  91 

93 

12.09 

6%  Montreal,  due  1922  

81.78 

94 

12.22 

5%  Winnipeg,  due  1926  

75.60 

86.90 

11.30 

Average  possible    Profit    On 

Cost,  22%  to  25% 

See  the  earlier  Section,  "Canada — Her  Growing 
Wealth",  for  details  of  the  present  financial  position 
of  the  Dominion. 


1109] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 


FRANCE 

INTERNAL  GOVERNMENT  LOANS 
(Bearer  Bonds) 

3%  Rente:  Perpetual  Loan,  Irredeemable.  (Not 
subject  to  French  income  tax) 

Bearer  bonds  of  100  francs  and  upwards,  with 
interest  coupons  attached. 

Interest  payable  quarterly,  on  the  first  days  of 
January,  April,  July,  and  October. 

At  the  normal  exchange,  each  bond  of  100  francs  is 
worth  $19.30;  each  bond  of  1,000  francs  is  worth  $193. 

This  is  the  standard  French  security,  and  its  price 
is  usually  near,  par  on  the  Paris  exchange. 

Present  Price.— 58%  of  the  face  value. 


5%,  1st  and  2d  War  Loans  of  1915,  and  1916. 
(Bearer  Bonds) 

Free  from  French  income  or  other  taxes. 

Bonds  of  200,  400,  1,000,  etc.,  francs. 

Interest  payable  quarterly;  Feb.  16,  May  16,  Aug. 
16,  November  16. 

Redeemable  after  January  1,  1931. 

At  the  normal  exchange  of  19.3  cents  per  $1,  the 
1,000  franc  bond  is  worth  $193,  face  value. 

Present  Price.— 883^%  of  the  face  value. 


4%  War  Loan  of  1917  (Bearer  Bonds) 
Free  from  French  income  or  other  taxes. 
Bonds  of  francs  100,  200,  400,  1,000,  etc. 

U10  J 


EXCHANGE  AND  FOREIGN  BONDS 

Interest  payable  by  coupons  quarterly,  March  16, 
June  16,  Sept.  16,  Dec.  16. 

Redeemable  from  Jan.  1,  1923. 

Face  value  of  1,000  franc  bond  at  normal  exchange, 
$193. 

Present  Price.— 71  y?%  of  the  face  value. 


4%  War  Loan  of  1918  (Bearer  Bonds) 

Free  from  French  income  or  other  taxes. 

Bonds  of  100,  200,  400  and  1,000  francs. 

Interest  payable  by  coupons  quarterly,  Jan.  16, 
April  16,  July  16,  and  October  16.  Redeemable  1944 
or  later. 

Face  value  of  1,000  franc  bond  at  normal  exchange 
$193. 

Present  Price.— 71%  of  the  face  value. 


5%  War  Loan  of  1920.    (Bearer  Bonds) 

Bonds  of  1,000,  2,000,  10,000,  and  20,000  francs. 

Interest  payable  half  yearly,  May  1  and  Nov.  1,  in 
New  York,  in  dollars,  at  the  current  rate  of  exchange 
then  in  force. 

Loan  redeemable  by  half-yearly  drawings  at  50% 
premium  on  the  face  value  of  the  bonds.  Drawings 
begin  1920. 

The  first  interest  coupon  is  payable  Nov.  1,  1920, 
and  will  be  for  252  days,  equal  to  35  francs  on  the  1,000 
franc  bond.  This  35  francs  will  be  payable  at  the  rate 
of  exchange  quoted  for  francs  in  New  York  on  Nov. 
1,  1920. 

[Ill] 


HOW  TO  MAKE  MONEY  IN   FOREIGN 

Each  bond  of  1,000  francs  is  worth  at  normal  ex- 
change $193.  Any  bond  drawn  payable  at  a  premium 
would  be  redeemed  at  1500  francs  for  the  1,000  franc 
nominal  value.  The  amount  received  in  dollars  would 
depend  on  the  rate  of  exchange  in  force  on  the  date  of 
the  drawing. 

Present  Price.— 100%  of  the  face  value. 


French  Municipal  (External  Loan)  Bonds 

The  6%  gold  bonds  of  1919,  of  the  cities  of  Lyons, 
Marseilles  and  Bordeaux,  due  for  redemption  Nov.  1, 
1934,  are  issued  in  bonds  of  $100,  $500  and  $1,000. 

Interest  payable  half  yearly  in  New  York  May  1  and 
Nov.  1,  at  the  fixed  exchange  of  $6  on  each  $100  bond. 
Principal  repayable  in  dollars  in  New  York. 

These  are  a  sound  investment  but  do  not  give  much 
chance  of  a  rise  in  value. 

Present  Price. — 83%  of  the  face  value. 


6%  Gold  Bonds  of  1916,  City  of  Paris 

Bonds  of  $100,  $500  and  $1,000. 

Interest  payable  in  New  York,  in  dollars,  at  the 
fixed  exchange  of  $6  per  $100  bond. 

Principal  repayable  in  Paris  Oct.  15,  1921,  at  the 
rate  of  francs  $5.50  per  $1,  the  normal  rate  of  exchange 
is  5.18  francs,  or  19.3c.  per  $1,  and  the  present  rate  is 
around  7  cents  per  franc. 

Present  Price. — 95%  of  the  face  value. 


Accrued  Interest. — The  market  prices  of  bonds  do 
not  include  the  interest  accrued  since  the  last  payment. 

[1121 


EXCHANGE  AND  FOREIGN  BONDS 


The  buyer  has  to  pay  this  interest  in  addition  to  the 
purchase  price  quoted.  On  the  other  hand,  when 
selling,  the  seller  receives  the  accrued  interest  in 
addition  to  the  selling  price. 

In  London,  on  the  contrary,  the  market  price  in- 
cludes the  accrued  interest. 


SECURITIES  TO  BUY— FRENCH 


Price  in 
Paris 
Sept.,  1920 

Francs 

Cost  at 
Normal 
Exchange 
of  19.30C 
Per  Franc 

Cost  at 
Present 
Exchange 
of  7c 
Per  Franc 

Possible 
Profit 
By  Rise  of 
Exchange 
Only 

Government  Bonds  of 
1,000  Francs: 

3%  Perpetual  Loan  
4%  of  1917  Issue  
5%  of  1920  Issue,  Redeem- 
able   

540 
715 

1020 

$104.22 
137.99 

196  86 

$37.80 
50.05 

71  40 

$66.42 
87.94 

125  46 

Average  Possible  Profit  by 
Rise     of     Exchange     to 
Former  Rates,  176%  on 
Cost 
Railroad  Bonds  (500  Frs.  :) 
Etat  (State  Railways)  5%  . 
Lyons  5% 

1 

3     364 

'•     370 

$70.25 
71  41 

$25.48 
25  90 

$44.77 
45  51 

Lyons  3%    . 

296 

57  12 

20  72 

36  40 

Midi  5%  

390 

U3TV/ 

75  27 

27  30 

47  97 

Nord  5%     .  .    . 

•£-  402 

77  59 

28  14 

49  45 

Orleans  5%  

^    390 

75  27 

27  30 

47  97 

Municipal  Bonds  of  100  Frs. 

*    6%  Paris  

tfe   ?; 

•*'•  91 

$17  56 

$6  37 

$11   19 

6%  Bordeaux  

•       83 

16  02 

5  81 

10  21 

6%  Lyons  

.    83 

16  02 

5  81 

10  21 

6%  Marseilles  

83 

16  02 

5  81 

10  21 

The  possible  profits  of  176%  on  cost  shown  above 
are  those  arising  only  from  advances  in  the  exchange 
rates. 

[1131 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

There  would  be  further  profits  by  advances  in  the 
selling  prices  of  the  securities  and  from  the  interest 
receivable. 

The  brokers'  commissions  for  buying  and  selling 
would  slightly  reduce  the  profits  shown. 

The  prices  quoted  are  likely  to  rise  during  the  Fall 
and  Winter  of  1920  and  afterwards. 


See  the  earlier  Section,  "France — Wealth  and  Re- 
sources", for  description  of  the  present  industrial  and 
financial  position  of  the  Republic. 


EXCHANGE  AND  FOREIGN    BONDS 


GERMANY 

War  Loans. — These  were  almost  entirely  issued  in 
Germany  and  subscribed  by  German  citizens.  As  it 
is  probable  that  both  the  principal  and  interest  may 
be  reduced  by  taxation  of  capital,  the  purchase  of 
War  Bonds  is  not  recommended. 


Loans  of  German  Cities. — The  Municipal  Bonds 
are  a  good  investment  at  present  prices. 

The  bonds  are  of  200,  1,000,  2,000  and  5,000  marks, 
bearer  bonds.  Interest  is  payable  half  yearly,  by 
coupons. 

The  face  value  of  each  1,000  mark  bond,  at  the 
nominal  exchange  of  23.80  cents  per  mark,  is  $238. 

Present  prices  are  about  1/12  of  the  nominal  value, 
being  around  2  cents  per  mark,  equal  to  $20  per  1 ,000 
mark  bond.  Even  a  small  advance  of  exchange  rates 
would  yield  a  large  profit  on  cost. 


Redeemable 

Present 
Price  Per 
1,000  Mka. 

Face  Value 
At  Normal 
Exchange 

Free  Ports: 

Bremen  4%  

By  Drawings 

$18 

$238 

Bremen  4H%  
Hamburg  4%  
Lubeck4%  
Other  Large  Cities: 
Berlin  4%  
Cologne  4%  

By  Drawings 
By  Drawings 

By  Drawings 
By  Drawings 

19 

19H 
18 

119 

20 

238 
238 
238 

$238 
238 

Crefeld4%  
Dresden  4%  
Dusseldorf  4%  
Frankfort  4%  
Leipzig  4%  ... 

By  Drawings 
By  Drawings 
In  30  /60  Yre. 
By  Drawings 
By  Drawings 

20 
19H 
17^ 
22H 
18 

238 
238 
238 
238 
238 

Magdeburg  4% 

In  28  Yrs 

22 

238 

Mayence  4%  .  . 

In  40  /50  Yrs. 

22 

238 

Mannheim  4%  

In  32  /37  Yrs. 

22 

238 

115 


HOW  TO  MAKE  MONEY   IN   FOREIGN 

There  are  other  cities,  in  addition  to  the  above, 
whose  bonds  are  good  investments;  the  prices  vary 
according  to  the  size  of  the  city,  the  date  of  redemp- 
tion of  the  bonds,  and  the  rise  or  fall  of  exchange 
rates. 

Saarbrucken  Bonds. — The  important  coal  min- 
ing and  iron  mining  district  of  Saarbrucken,  which 
was  formerly  German  territory,  has  been  declared 
a  neutral  district  for  the  next  15  years,  pending  a 
decision  as  to  its  ultimate  incorporation  with  French 
or  German  territory. 

Meanwhile  it  is  being  governed  by  a  Commission 
appointed  by  the  League  of  Nations.  The  main  line 
of  railway  between  Cologne  and  Metz  serves  this  area. 

The  district  has  the  advantage  of  free  trade  with 
both  Germany  and  France,  no  customs  duties  being 
payable  to  either  of  these  countries.  The  area  of  the 
district  is  772  square  miles,  and  the  population  is 
about  800,000.  The  production  of  coal  in  1913  was 
16%  million  tons.  The  iron  mines  employ  about 
60,000  men.  There  are  also  large  machine  shops,  iron 
foundries,  electrical  works,  and  glass  works. 

The  City  of  Saarbrucken  issued  a  4%  loan  in  1910 
for  17}^  million  marks,  which  appears  well  secured. 

The  Land  Mortgage  Bank  of  Saarbrucken  issues  4% 
bonds,  which  are  also  good  investments. 

Both  these  bonds  are  now  purchasable  on  the  basis 
of  the  very  low  price  of  the  German  mark,  at  about 
1/12  of  their  face  value. 

They  are  a  good  investment,  especially  as  they  are 
not  subject  to  the  10%  income  tax  levied  on  the 
interest  receivable  from  German  bonds. 

[1161 


EXCHANGE  AND  FOREIGN   BONDS 

4%  German  Land  Bank  Mortgage  Bonds.— 

These  bonds  are  secured  by  mortgages  on  land  and 
buildings,  to  amounts  not  exceeding  %  of  their  values. 
All  of  these  land  banks  have  paid  regular  dividends  on 
their  capital  stocks,  ranging  from  5%  to  14%. 

The  prices  of  the  bonds  vary  with  the  rates  of  ex- 
change; even  at  par  in  marks,  they  would  be  cheap, 
but  they  can  be  bought  at  a  discount  from  face  value. 
The  bond  of  1,000  marks  costs  at  present  from  $25  to 
$28,  as  against  a  normal  value  of  $238. 

The  following  is  a  list  of  the  largest  and  best  Land 
Banks,  whose  bonds  will  be  the  most  easily  saleable 
on  a  rise  in  exchange. 

Purchasers  of  these  bonds  now  are  likely  to  obtain 
large  profits  through  the  rise  in  exchange;  the  bonds 
are  sound  investments. 

Bavarian  Commercial  Bank 

Bavarian  Mortgage  and  Exchange  Bank 

Brunswick  and  Hanover  Mortgage  Bank 

German  Land  Credit  Bank 

German  Mortgage  Bank 

Frankfort  Mortgage  Bank 

Mortgage  Bank  of  Hamburg 

Leipzig  Mortgage  Bank 

Mecklenburg  Mortgage  Bank 

Palatine  Mortgage  Bank 

Prussian  Land  Credit  Bank 

Prussian  Central  Land  and  Credit  Banking  Co. 

Prussian  Mortgage  Bank 

Prussian  Mortgage  Bank  of  Berlin 

Rhenish  Mortgage  Bank  ...         ..    t(, 

Silesian  Land  Credit  Bank        ,   ......      ,      -  . 

[117 


HOW  TO  MAKE  MONEY  IN   FOREIGN 

South  German  Land  Credit  Bank 
West  German  Land  Credit  Bank 
Wurtemburg  Land  Credit  Bank 

Bonds  of  German  Industrial  Companies.—  The 

following  is  a  selection  of  the  bonds  of  large  manu- 
facturing companies,  all  of  which  pay  good  dividends. 

These  bonds  can  now  be  bought  below  their  usual 
market  prices.  On  a  rise  of  exchange,  the  market 
prices  of  the  bonds  will  also  improve.  They  may  be 
bought  from  New  York  in  amounts  of  5,000  marks 
and  upwards. 

At  the  present  rate  of  exchange  a  1,000  mark  bond 
would  cost  from  $18  to  $20,  instead  of  its  nominal 
value  of  $238.  These  bonds  are  freely  saleable  in 
Germany.  They  are  well  worth  holding  for  the  rise 
in  exchange. 

Bochum  Cast  Steel,  4% 

Germania  Portland  Cement  Works, 

Aniline  Manufacturing  Co., 

Hamburg  Dynamite  Company, 

Eiberfeld  Dye  Drugs  Works, 

Hoechster  Dye  Drugs  Works, 

Augsburg-Nurnberg  Machinery  Mfg.  Co., 

Humboidt  Machine  Works,  5% 

General  Electric  Co.  (A.E.G.)  4% 

Bergman  Electric  Co.,  4j/£% 

Berlin  Electric  Co.,  4J^% 

Siemens  Halske  Co.,  4% 

Siemens-Schuckert  Works, 


In  the  earlier  Section  "Germany—  Will  She  Re- 
cover?" details  are  given  of  the  present  industrial 
and  financial  position  of  the  country. 

(1181 


EXCHANGE  AND  FOREIGN  BONDS 


ITALIAN  GOVERNMENT  BONDS 

5%  Internal  War  Loan  of  1918.  (Free  of  all  Italian 

income  and  other  taxation.) 

Interest  payable  half-yearly,  Jan.  1  and  July  1. 
Not  redeemable  before  1932. 

Bonds  of  100,  200,  500,  1,000,  etc.  lire. 

Face  value  of  the  bond  of  1,000  lire,  at  the  normal 
exchange  of  19.30c.  per  lire,  $193. 

Present  price,  bought  from  New  York,  $39  per 
1,000  lire  bond. 


5%  Internal  Perpetual  Loan  of  1920.  (Free  from  all 
Italian  taxation.) 

Interest  payable  half  yearly,  January  1  and  July  1. 

Principal  not  redeemable. 

Bonds  of  200,  500,  and  1,000  lire. 

Face  value  of  the  1,000  lire  bond  at  normal  ex- 
change, $193. 

Present  price,  bought  from  New  York,  about  $40. 


5%  Treasury  Notes,  Issued  October  1,  1919. 

3-year  bonds,  due  October  1,  1922. 
5-year  bonds,  due  October  1,  1924. 
Present  price,  bought  from  New  York,  $46.50  per 
1,000  lire  bond;  value  at  normal  exchange,  $193. 


See  earlier  Section,  "Italy — Her  Commercial  Re- 
organization", for  details  of  the  present  economic 
position  of  this  kingdom. 

119 


HOW  TO  MAKE  MONEY  IN   FOREIGN 

JAPANESE  GOVERNMENT  STERLING  BONDS 

The  following  bonds  are  payable  in  London,  in 
sterling. 

Owing  to  the  British  pound  sterling  being  at  a  dis- 
count of  over  25%,  these  Japanese  Bonds  can  be 
bought  at  about  30%  below  their  usual  market  price. 
With  a  rise  in  British  exchange,  the  bonds  can  be 
sold  to  realise  good  profits. 

5%  Sterling  Loan  of  1907 

Issued  in  London  and  Paris,  redeemable  at  par,  on 
half-year's  notice  after  March  12,  1922.  Interest 
payable  half  yearly,  March  12  and  September  12. 

Bonds  of  £20,  £50,  £100,  ($97.33,  $243.32}^, 
$486.65). 

Present  price,  in  London,  £69,  equal  to  $248.40 
at  exchange  of  $3.60;  face  value  at  normal  exchange, 
$486.65. 

In  1919  the  highest  price  was  £95^,  and  the 
lowest  £73;  the  price  on  July  27,  1914,  just  before  the 
war,  was  £98. 

The  possible  profits  are  33%  by  a  rise  of  exchange 
to  par,  plus  42%  by  the  rise  of  the  bonds  to  the  pre- 
war selling  price  of  £98;  total  75%  and  interest. 

4%  Sterling  Loan  of  1910 

Issued  in  London,  redeemable  1970,  in  sterling. 

Interest  payable  half  yearly  June  1  and  December  1. 

Bonds  of  £20,  ($97.33);  £50,  ($243.32^)  and  £100 
($486.65). 

Present  Price,  in  London,  £55^.  being  $199.80,. 
at  the  exchange  of  $3.60. 

[120] 


EXCHANGE  AND  FOREIGN  BONDS 

Face  value  at  normal  exchange  $486.65. 

In  1919  the  highest  price  was  £80  and  the  lowest 
£55. 

On  July  27,  1914,  a  week  before  the  war,  the  market 
price  was  £75. 

Possible  profits,  33%  on  exchange  and  35%  on  rise 
of  market  price  to  £75,  total  68%  and  interest. 


[121 


HOW  TO  MAKE  MONEY  IN  FOREIGN 


RUSSIAN  GOVERNMENT  BONDS 

The  buying  of  Russian  exchange  in  the  form  of 
drafts  on  Russian  banks  cannot  be  recommended  at 
present. 

All  of  the  Russian  Government  bonds  have  been 
repudiated  by  the  Bolsheviki,  but  the  French,  who 
have  several  billion  dollars  invested  in  these  bonds,  are 
determined  to  enforce  recognition. 

The  French  Government  has  stated  definitely  that 
it  will  recognise  no  form  of  Russian  Government 
which  does  not  agree  to  accept  liability  for  the  loans 
issued  by  the  former  Russian  Imperial  Government, 
which  were  chiefly  subscribed  by  the  French  people. 
The  French  Government  is  backing  this  declaration 
with  armed  assistance  to  the  new  Russian  leaders,  who 
have  promised  to  recognise  the  outstanding  Russian 
loans. 

The  purchase  of  Russian  Government  bonds  may 
therefore  be  regarded  as  a  speculation,  with  the  chan- 
ces largely  in  favor  of  the  purchaser. 

The  normal  exchange  value  of  the  rouble  is  51.46 
cents.  At  present  it  is  quoted  around  1.3  cents  per 
rouble,  which  is  only  2J^%  of  its  former  value. 

Prices  of  bonds  are  higher  than  for  currency,  which 
is  greatly  inflated,  but  rises  in  exchange  will  improve 
the  prices  of  bonds. 

Russian  exchange  cannot  possibly  fall  much  lower; 
it  is  probable  that  it  will  rise  considerably  within  the 
coming  12  months.  The  profits  obtainable  in  such  a 
case  may  be  several  hundreds  per  cent. 

[122] 


EXCHANGE  AND  FOREIGN  BONDS 


Loan  of  1916 

Redeemable  February  14,  1926;  interest  payable 
February  14  and  August  14,  but  in  default. 

Bonds  of  100,  500,  1,000,  5,000  etc.,  roubles. 

Many  of  these  were  bought  in  New  York  in  1916. 

At  that  time,  Russian  exchange  was  quoted  30c.  per 
rouble,  as  against  the  present  quotation  of  lM  cents. 

A  1,000  rouble  bond  can  be  bought  now  for  $15,  com- 
pared with  the  market  price  of  over  $300  in  1916. 
At  normal  exchange  this  bond  would  be  worth  $514.60. 
A  return  to  the  1916  rates  of  exchange  would  yield 
a  profit  of  20  times  the  amount  invested  now. 


LONDON  STOCK  EXCHANGE  PRICES  FOR 
RUSSIAN  BONDS,  SEPTEMBER,  1920 

4%  Russian  Government  Railway  Bonds  (£17 
per  £100  bond) ;  at  the  exchange  of  $3.60  to  the  pound 
sterling  this  is  equal  to  $61.20  for  the  bond  of  $486.00. 

5%  Russian  Government  Bond,  Series  I,  1889, 

(£29  per  £100  bond) ;  at  the  exchange  of  $3.60  to  the 
pound  sterling  this  is  equal  to  $104.40  for  the  bond  of 
$486.00. 


123 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

PARIS  STOCK  EXCHANGE  PRICES  FOR  RUS- 
SIAN GOVERNMENT  BONDS,  SEPT,  1920 


l.OOOFr. 
Bond 
Price  in 
Sept.,  1920 

Price  Bought 
From 
New  York, 
At  Exchange 
of  7c  Per 
Franc 

Same  Price 
At  Normal 
Exchange 
of  19.30c 

4     %  Loan  of  1893  (5th)  

262  K  Frs. 

$18  40 

$50.66 

3>$%  Loan  of  1894  

262  J^  Frs. 

18.40 

50.66 

3     %  Loan  of  1891-94  

310      Frs. 

21.70 

59.83 

4     %  Loan  of  1901  

265      Frs. 

18.60 

51.15 

5     %  Loan  of  1906  

475      Frs. 

33.30 

91.68 

3Ji%  Loan  of  1909  

352H  Frs. 

24.70 

68.03 

These  bonds  are  in  amounts  of  500  francs.  The 
minimum  quantity  sold  is  2,000  francs.  The  market 
prices  quoted  above  are  for  bonds  of  1000  francs,  the 
face  value  at  normal  exchange  being  $193.  As  an 
example  of  the  profits  obtainable  it  will  be  seen  by 
the  above  list  that  the  5%  loan  of  1906,  now  offered 
at  $33.60,  is  at  only  one  sixth  of  its  normal  price. 

Paris  is  the  best  market  for  Russian  Government 
Bonds. 


See  the  earlier  Section,  "Russia — Present  and 
Future",  for  description  of  the  present  position  of  her 
finances. 


(124 


EXCHANGE  AND  FOREIGN  BONDS 


MEXICO 


During  the  last  6j/£  years,  Mexico  has  ceased  to 
pay  interest  on  her  Government  bonds  and  the 
interest  has  been  accumulating  against  her. 

The  reason  for  the  default  has  been  the  various 
revolutions  which  have  taken  place  during  the  time 
named.  Each  party,  when  it  obtained  power,  has 
been  more  anxious  to  collect  funds  than  to  pay  the 
nation's  debts.  One  of  the  chief  causes  of  the  various 
revolutions  has  been  the  wretched  condition  of  the 
poorer  classes  of  the  native  Indian  population,  of 
whom  80%  are  unable  to  read  or  write. 

The  country  is  rich  in  agricultural,  mineral  and  oil 
resources,  which  are  only  partly  developed.  The 
greater  portion  of  the  trading  is  with  the  United 
States. 

Civil  war  began  at  the  end  of  1913,  but  the  Euro- 
pean war  of  1914  prevented  any  interference  by  the 
powerful  financial  groups  which  have  large  invest- 
ments in  Mexican  territories. 

These  groups  have  now  taken  measures  to  end  the 
revolutionary  fighting  'and  their  influence  is  suffi- 
ciently strong  to  ensure  peace  in  the  country  for  some 
years  to  come. 

Mexico  is  settling  down  to  agriculture  and  trade, 
and  she  will  recover  rapidly. 

Mexican  Government  bonds  are  selling  at  present 
at  about  one-fourth  of  their  face  value.  They  are 
not  a  first  class  investment,  as  regards  safety,  but  the 
same  strong  influence  which  has  forced  peace  on  the 

[125] 


HOW  TO  MAKE  MONEY  IN  FOREIGN 

country  is  expected  to  bring  about  an  improvement  in 
the  national  finances.  In  1921  there  will  probably  be 
arrangements  made  for  the  payment  of  the  arrears  of 
interest  unpaid  since  June,  1914.  Most  likely  new 
bonds  will  be  issued  for  a  portion  of  the  interest. 

The  purchase  of  Mexican  bonds  now  is  a  specu- 
lation, but  the  chances  are  largely  in  favor  of  a  pur- 
chaser, who  should  make  good  profits  well  within  the 
next  two  years. 

The  following  are  the  chief  descriptions  of  Mexican 
bonds  issued,  all  of  which  have  the  interest  owing 
from  July  1,  1914,  being  6^  years.  The  words 
"Gold"  and  "Silver"  show  the  currency  in  which 
principal  and  interest  are  payable : 

External  Debt: 

Mexican  Government  Gold  Loans,  4%  and  5%. 

Mexican  Government  Gold  6%  Treasury  Bonds. 

City  of  Mexico  5%  Sterling  Loan. 
Internal  Debt: 

Interior  Consolidated  Silver  3%  and  5%. 
Bonds  Guaranteed  By  the  Mexican  Govern- 
ment: 

5%  State  Loans  of  Vera  Cruz,  Tampaulipas  and 
Sinaloa. 

Caja  de  Prestamos  4^%  Sinking  Fund. 

Mexican  National  Packing  Co.,  6%  1st  and  2nd 

Mortgage  Gold  Bonds. 
State  Bonds  Not  Guaranteed  By  the  Mexican 

Government : 

State  of  Aguascalientes,  Silver  5% 

State  of  Chihuahua,  Silver  5% 

[1261 


EXCHANGE  AND   FOREIGN   BONDS 

State  of  Coahuila,  Gold  6% 
State  of  Durango,  Silver  5% 
State  of  Jalisco,  Gpld  6%  and  Silver  6% 
State  of  Morelos,  Silver  6% 
State  of  San  Luis  Potosi,  Gold  6% 
Municipal    Bonds   Not    Guaranteed    By    the 
Mexican  Government: 
City  of  Cordova,  Silver  6% 
City  of  Parral,  Silver  6% 
City  of  Puebla,  Silver  6% 
City  of  Saltillo,  Gold  6% 

National  Railways  of  Mexico — Funded  Debts. 

—Numerous  issues;  for  some  of  these  both  principal 
and  interest  are  overdue. 

Other    Railways — Debentures,    Mortage    De- 
bentures and  Gold  Bonds. 


Examples    of    Present    Market    Prices. — The 

following  are  examples  of  the  prices  at  which  Mexican 
Bonds  can  be  bought  in  New  York.  It  will  be  seen 
that  these  prices  are  in  some  cases  not  much  more 
than  the  amount  of  interest  due  on  the  Bonds. 

External  Loans. — Mexican  Government  Consoli- 
dated 5%  Gold  Loan;  issued  1899,  $100  Bonds; 
amount  of  interest  in  arrears  $30;  market  price  of 
bond,  including  right  to  receive  the  interest,  $41. 

Mexican  Government  4%  Gold  Loan  of  1904; 
$100  Bonds;  interest  due  and  unpaid,  $24;  market 
price  of  bond,  including  right  to  arrears  of  interest, 
$38. 

[127] 


HOW  TO  MAKE  MONEY   IN  FOREIGN 

Internal  Loans.  —  Mexican  Government  Internal 
5%  Bonds;  issued  1895,  $100  bonds;  interest  in  arrears 
$30;  market  price  of  bond,  including  right  to  receive 
arrears  of  interest,  $33. 

National  Railways  of  Mexico  —  Funded  Debt 


Prior  Lien  4J^%  Bonds,  due  for  repayment  July  1, 
1957;  interest  in  arrears  $27;  market  price  of  the  $100 
bonds,  including  right  to  the  arrears  of  interest,  $24. 

Prior  Lien  4J^%  Bonds,  due  for  repayment  October 
1,  1926;  interest  in  arrears  $27;  market  price  of  the 
$100  bond,  including  the  right  to  arrears  of  interest, 
$28. 

First  Consolidated  Lien  4%  Bonds,  due  for  repay- 
ment October  1,  1951;  interest  in  arrears  $24;  market 
price  of  the  $100  bond,  including  right  to  the  arrears 
of  interest,  $17. 

How  To  Buy.  —  Consult  a  good  broker  or  dealer, 
and  take  his  advice  as  to  the  best  bonds  to  buy.  For 
preference,  buy  the  bonds  which  are  the  most  generally 
dealt  in,  so  as  to  be  able  to  realise  easily  on  a  rise 
taking  place.  Then,  sit  tight,  and  don't  be  persuaded 
to  sell  until  a  good  profit  can  be  obtained. 

When  Bonds  Will  Rise.—  The  market  prices 
should  have  risen  appreciably  within  six  months; 
profits  may  be  taken  then,  but  it  will  be  better  to 
wait  for  the  larger  profits  to  be  made  by  holding  the 
bonds  for  two  years. 

Why  They  Will  Rise.—  The  Mexican  people  are 
weary  of  the  six  years  of  civil  war.  The  American 
and  other  capitalists  who  have  invested  in  railways, 

[128] 


EXCHANGE  AND   FOREIGN   BONDS 

oil  fields  and  mines,  have  now  made  satisfactory 
arrangements  with  the  new  rulers  of  the  country  for 
protection  of  Mexican  industries. 

The  rises  in  price  of  Mexican  products  have  en- 
abled Mexican  laborers  to  earn  higher  wages,  so 
removing  the  cause  of  most  of  the  disturbances. 

The  nearness  of  Mexico  inevitably  brings  it  under 
the  influence  of  the  United  States,  which  needs  her 
products. 

Peace  in  Mexico  is  necessary  for  trade  and  the 
trading  influence  is  now  strong  enough  to  ensure 
peace,  especially  as  the  former  state  of  hopeless 
poverty,  and  practical  slavery,  of  many  classes  of  the 
workers  has  been  considerably  changed  for  the  better. 
The  previous  conditions  bred  lawlessness  by  their 
rank  unfairness. 

With  fair  treatment  for  both  capital  and  labor, 
Mexico  may  look  forward  confidently  to  a  run  of 
prosperity. 


[129] 


Clover  Press  Corporation 
New  York  City 


14  DAY  USE 

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